American Economic Journal: Economic Policy
no. 1, February 2023
We study tax loss asymmetry for S corporate owners. These owners use most losses contemporaneously, reducing the tax asymmetry compared to C corporations. However, these owners face distortions due to the progressive individual tax schedule. The value of this asymmetry is approximately $3.5 billion per year. We find that this asymmetry creates disincentives for risky investment and causes allocative inefficiencies among loss and gains owners. Finally, we simulate the effects of certain provisions of the Tax Cuts and Jobs Act; we estimate that these provisions—especially section 199A—reduce the behavioral distortions of the asymmetry for S corporate owners.
Goodman, Lucas, Elena Patel, and Molly Saunders-Scott.
"Implications of Tax Loss Asymmetry for Owners of S Corporations."
American Economic Journal: Economic Policy,
Firm Behavior: Empirical Analysis
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Firm