Using a model of corporate investment in which the deferred tax liability never reverses, I show that deferred taxes are a real economic burden whose value is the amount recognized multiplied by a fraction. The numerator of the fraction is the tax depreciation rate, and the denominator of the...

We propose an explanation for why states choose different apportionment formulas for corporate income tax purposes. Based on a two-state equilibrium model of location choice by firms, we show that aggregate social welfare is maximized when both states use the same formula, regardless of which...

This study identifies a tax disadvantage of debt that arises when a firm’s business model fails and it liquidates its assets at a loss. If the outstanding debt is greater than or equal to the salvage value of the firm’s assets, the firm will not have assets to generate income to use the loss...