NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Dynamic Effects of Tax Law Asymmetries

Alan J. Auerbach

NBER Working Paper No. 1152 (Also Reprint No. r0741)
Issued in June 1983
NBER Program(s):   PE

Under current U.S. tax law, a distinction is made between gains and losses by businesses. Losses that must be "carried forward" are subject to two penalties: a loss of interest, and expiration after fifteen years. Previous examinations have focused on the higher expected tax payments such a tax system without "full loss offset" imposes on risky projects.This paper presents a dynamic analysis of the impact of taxation on investment when gains and losses are treated asymmetrically. The results provide a basis for analyzing recent tax changes, particularly the controversial"safe-harbor leasing" provisions of the 1981 tax legislation.

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Document Object Identifier (DOI): 10.3386/w1152

Published: Auerbach, Alan J. "The Dynamic Effects of Tax Law Asymmetries." Review of Economic Studies, Vol. 53, (1986), pp. 205-225. citation courtesy of

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