George Washington University, Washington, DC 20052, USA
Abstract:
This paper develops and applies a model to measure the effects of deferral on world and U.S. incomes. It is assumed that elimination of deferral would be accompanied by a compensating reduction in the U.S. corporate income tax rate which would leave the overall tax burden of corporations unchanged. The results of the model support several conclusions: Deferral has a positive net effect on world income, but has a negative effect on U.S. income; over two-thirds of the income gains of foreign countries due to deferral goes to developed or oil-exporting countries; and the Tax Reform Act of 1976 has roughly doubled the importance of deferral.