Taxes and the Efficiency Costs of Capital Distortions

Alfons J. Weichenrieder, Tina Klautke and Alfons Weichenrieder
Authors registered in the RePEc Author Service: Alfons J. Weichenrieder

No 2431, CESifo Working Paper Series from CESifo

Abstract: Tax neutrality towards alternative financing instruments for corporate investment is a ubiquitous demand in the political debate. At the same time, the literature is surprisingly silent about the magnitude of possible efficiency costs of a departure from tax neutrality. Against this background, the present paper discusses the theory of capital structure and provides backof-the-envelope calculations of the possible efficiency cost of a tax distortion of the debtequity decision.

Keywords: debt-equity choice; capital structure; excess burden of taxation (search for similar items in EconPapers)
JEL-codes: G32 H25 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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