TY  - JOUR
AU  - Feldstein,Martin
AU  - Poterba,James M.
AU  - Dicks-Mireaux,Louis
TI  - The Effective Tax Rate and the Pretax Rate of Return
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 740
PY  - 1981
Y2  - September 1981
UR  - http://www.nber.org/papers/w0740
L1  - http://www.nber.org/papers/w0740.pdf
N1  - Author contact info:
Martin S. Feldstein
President Emeritus
NBER
1050 Massachusetts Avenue
Cambridge, MA  02138-5398
Tel: 617/868-3905
Fax: 617/868-7194
E-Mail: msfeldst@nber.org

James M. Poterba
Department of Economics
MIT, E52-350
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-6673
Fax: 617/258-7804
E-Mail: poterba@nber.org

Louis Dicks-Mireaux
AB  - This paper presents new estimates of the taxes paid on nonfinancial corporate capital, on the pretax rate of return to capital, and on the effective tax rate. The basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century. An explicit analysis indicates that, after adjusting for different aspects of the business cycle, pretax profitability was between one and 1.5 percentage points lower in the 1970's than in the 1960's. The rate of profitability in the 1960's was also about one-half of a percentage point greater than the profitability in the 7 years of the 1950's after the Korean war. Changes in productivity growth, in inflation, in relative unit labor costs, and in other variables are all associated with changes in profitability. None of these variables, however, can explain the differences in profitability between the 1950Ts, 1960's and 1970's. Looking at broad decade averages, the effective tax rate and the pretax rate of return move in opposite directions, higher pretax profits occurring when the tax rate is high. There thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates.
ER  -