Estimating the Tax Advantage of Corporate Debt
Estimating the Tax Advantage of Corporate Debt
复制标题
估计公司债务的税收优势
DOI：
10.1111/j.1540-6261.1983.tb03628.x
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发表时间：
1983
影响因子：
8
通讯作者：
S. Sheffrin
中科院分区：
文献类型：
--
作者：
J. Cordes;S. Sheffrin
This paper presents estimates of the effective tax value of incremental interest deductions for corporations taking into account that they may not be able to utilize all their interest deductions fully because of either insufficient taxable income or the availability of nondebt tax shields. After describing particular features of the tax code which may drive a wedge between statutory and effective tax rates for debt finance, we present estimates using the Treasury Corporate Tax Model of effective tax rates for a variety of industry groupings. Our estimates suggest that the after-tax cost of debt varies widely across industries. THE MAGNITUDE OF THE effective tax advantage to debt finance has important implications for corporate financial behavior. One issue which has been examined extensively in the corporate finance literature is whether the value of the firm is affected by the firm's leverage ratio. In a recent contribution, DeAngelo and Masulis [3] have shown that financing decisions can affect the value of the firm if the effective tax advantage to debt finance varies among firms or is reduced by the presence of nondebt tax shields such as investment tax credits and depreciation deductions. The effective tax advantage to debt is also an important determinant of leverage-related costs. Gordon and Malkiel [5] have recently used the statutory tax rate to estimate expected bankruptcy costs induced by the corporate tax when the firm is assumed to balance the marginal tax advantage to debt with marginal expected bankruptcy costs. If, however, the effective tax rate for interest deductions falls short of the statutory rate, the magnitude of these costs may be overstated. This paper presents detailed estimates of the marginal effective tax advantage to debt finance. Our estimates, based on data in the Treasury 1978 Corporate Master Statistical File and on simulations done with the Treasury Corporate Tax Model, quantify the impact of increasing interest deductions without changing other items on the corporation's income statement.1 We simulate the impact of a change in a firm's capital structure holding its investment and production decisions constant. This is an appropriate procedure for estimating the marginal
