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The impact of paid tax return preparers on the horizontal equity (HE) of the federal tax system has significance for regulatory and tax policy reasons. Using multiple analytical techniques to consider data from the Statistics of Income Division's 2000 Individual Model File (IMF), this study shows that the HE measure is generally greater (implying less HE) for the paid-preparer returns than for the self-prepared returns, even after controlling for complexity and other variables that may differ systematically by tax preparation mode.

The coefficient of variation (CV) and coefficient of residual variation (CRV) have been used as measures of horizontal equity. Both, however, are noisy measures in that they overstate the amount of variation due to inequity in the tax system (Grasso & Frischmann 1992). The purpose of the current study, therefore, is to use the CRV of tax liability and provide an estimate of the portion of this CRV measure that is due to the tax system alone and that portion that is due to specification error. This precision is an improvement over the Grasso and Frischmann model. The first purpose is achieved by computing the difference between two CRV measures. The first CRV measure is derived from a regression of an expanded total income amount (ETI) on tax liability; the second CRV measure is from a regression of several explanatory variables on tax liability. To the extent that the more fully-specified regression captures the Internal Revenue Code provisions, the reduction in the CRV measure can be attributed to the tax system. A second purpose of this study is to estimate the extent to which the various types of tax code provisions cause this variation. The second purpose is achieved by an iterative process of omitting one explanatory variable from the full regression and determining the change in CRV due to this omitted variable.

The purpose of this paper is to examine the profitability of different ownership forms of banks. The two ownership forms are corporations that elect to be taxed as a Subchapter S corporation (limited to 100 shareholders) as opposed to those corporations that do not make this election. The impact this election has on the dividends paid to the investors is examined.

This paper uses Call Report Data on Wisconsin banks as collected by SNL Securities as its database. The research methodology uses two measures of performance: dividend ratio and accounting return on assets (ROA). The dividend ratio is defined as dividends as a percentage of net income (dividends/net income). Accounting return on investment is net income as a percentage of total assets (net income/total assets) and is a measure of profitability. A number of regressions were created with these as the endogenenous variables and a heteroskedasticity‐corrected ordinary least squares (OLS) model was used.

Subchapter S banks were found to be more profitable (as measured by ROA). However, when taxes are taken into account, there is no practical difference in profitability between the two types of corporate structure.

By limiting the analysis to Wisconsin, a single state, confusion that may be caused by both state laws (personal and corporate) and local corporate cultures is avoided.

The practical implications of this research can guide the federal government in determining whether this form of stock ownership is a device that reduces or increases federal tax revenues. It can also provide insight to the stockholders of these banks into the differences in profitability these corporate forms offer.

While earlier literature has reviewed the concept of Subchapter S corporations and its theoretical impact, little research has been conducted that tests the actual results. Due to the private nature of the corporate form (these types of corporations are often not publicly traded and have no incentive to reveal private financial records), this original research is the result of the public nature of banks that provide a rich dataset for us to examine.