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1 – 10 of 85Cesar L. Escalante and Peter J. Barry
This study identifies key strategies employed by Illinois grain farms to prevent the erosion of their equity positions due to significant downturns in commodity prices during the…
Abstract
This study identifies key strategies employed by Illinois grain farms to prevent the erosion of their equity positions due to significant downturns in commodity prices during the implementation of the 1996 farm bill. The econometric results emphasize the collective importance of revenue enhancement, cost reduction, and capital management strategies. Nonfarm‐related strategies aimed at minimizing equity withdrawals through regulated family living expenditures, as well as supplementing low farm incomes with receipts from nonfarm employment and investments, significantly affect cost value equity growth rates. Moreover, significant financial and asset management strategies include those that minimize the costs of borrowing and maintain high asset productivity levels through elimination of excess farm capacity.
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A tax based on land value is in many ways ideal, but many economists dismiss it by assuming it could not raise enough revenue. Standard sources of data omit much of the potential…
Abstract
Purpose
A tax based on land value is in many ways ideal, but many economists dismiss it by assuming it could not raise enough revenue. Standard sources of data omit much of the potential tax base, and undervalue what they do measure. The purpose of this paper is to present more comprehensive and accurate measures of land rents and values, and several modes of raising revenues from them besides the conventional property tax.
Design/methodology/approach
The paper identifies 16 elements of land's taxable capacity that received authorities either trivialize or omit. These 16 elements come in four groups.
Findings
In Group A, Elements 1‐4 correct for the downward bias in standard sources. In Group B, Elements 5‐10 broaden the concepts of land and rent beyond the conventional narrow perception, while Elements 11‐12 estimate rents to be gained by abating other kinds of taxes. In Group C, Elements 13‐14 explain how using the land tax, since it has no excess burden, uncaps feasible tax rates. In Group D, Elements 15‐16 define some moot possibilities that may warrant further exploration.
Originality/value
This paper shows how previous estimates of rent and land values have been narrowly limited to a fraction of the whole, thus giving a false impression that the tax capacity is low. The paper adds 14 elements to the traditional narrow “single tax” base, plus two moot elements advanced for future consideration. Any one of these 16 elements indicates a much higher land tax base than economists commonly recognize today. Taken together they are overwhelming, and cast an entirely new light on this subject.
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State and federal revenues fell well short of projections in 2002. While revenues normally turn down in a recession, those revenue shortfalls were much greater than would have…
Abstract
State and federal revenues fell well short of projections in 2002. While revenues normally turn down in a recession, those revenue shortfalls were much greater than would have been expected given how mild the 2001 recession turned out to be. This paper examines some of the reasons for the large forecast variances observed in recent years using specific examples from forecasts made for the state of Minnesota. Key factors identified include inaccurate forecast for U.S. economic growth; inadequate, untimely and inaccurate data; imperfect models; and unrecognized changes in the structure of the economy. These factors came together and reinforced each other, ultimately producing a larger reduction in state revenues than could have been anticipated in advance.
This article aims to report the results of research into the effect of expanding the traditional models for valuation of simple securities to include the effect of taxation of the…
Abstract
Purpose
This article aims to report the results of research into the effect of expanding the traditional models for valuation of simple securities to include the effect of taxation of the cash flows from investing and the possibility of bankruptcy of the issuer.
Design/methodology/approach
The models developed use the same techniques as the textbook models but lead to conclusions that are novel.
Findings
In particular, the models suggest that reducing the tax rate on capital gains does not always benefit bondholders and shareholders. For common stock the changes in both market value and realizable value depend not only on the change in tax rate, but also on the growth rate of the dividend stream.
Practical implications
The models presented follow the textbook models, so they assume stationary conditions. Future research should examine the case of conditions that may be mean‐reverting but are not stationary.
Originality/value
The immediate practical implications are in the domain of public policy, where the debate over the effect of tax changes has been based on overly simplified models.
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White House efforts to hike corporate tax and the rate paid by individuals with annual incomes over USD400,000 have stalled. In their place, bills have been put forward to tax…
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DOI: 10.1108/OXAN-DB265072
ISSN: 2633-304X
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The purpose of this paper is to show how recent capital gains affect ex‐dividend stock pricing. Traditional models assume that investors are motivated to sell a stock before its…
Abstract
Purpose
The purpose of this paper is to show how recent capital gains affect ex‐dividend stock pricing. Traditional models assume that investors are motivated to sell a stock before its ex‐date to avoid paying higher taxes on dividends. However, if a stock has appreciated significantly, stockholders have an offsetting incentive to delay the realization of capital gains by continuing to hold the stock in spite of the higher dividend tax rate.
Design/methodology/approach
This paper develops a model showing that ex‐dividend price drops should be greater in the presence of larger accrued capital gains. The model was tested by regressing ex‐day pricing measures on the relative size of the recently accrued gain, along with other control variables.
Findings
Empirical tests confirm that accrued gains reduce the magnitude of the ex‐day effect, increasing the price drop ratio (ΔP/D) and reducing ex‐day returns. Also documented was that ex‐day price drops are larger for stocks that have recently experienced positive gains, that the observed effect of recent price performance is stronger for higher‐yield stocks, and that share turnover is usually lower for stocks with greater gains.
Research limitations/implications
This paper's findings suggest that the results of existing empirical investigations of ex‐day pricing should be interpreted with some caution, and that future studies should control for gains that occur prior to the ex‐date.
Originality/value
While the tax clientele explanation of ex‐day pricing has been investigated extensively, this is the first study to show how accrued gains and losses impact ex‐dividend price changes.
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Andrew H. Chen and Edward J. Kane
This paper uses the capital asset pricing model to show that, in realistic circumstances, double taxation and differential tax rates on personal and capital-gains income affect…
Abstract
This paper uses the capital asset pricing model to show that, in realistic circumstances, double taxation and differential tax rates on personal and capital-gains income affect corporate stock values and financial policies in non-neutral ways. This non-neutrality holds whenever inflation is uncertain and tax-avoidance activity is neither costless nor riskless. The model also allows us to explore how a series of frequently proposed changes in the interplay of corporate and personal taxes would affect corporate dividend payouts and debt usage. Our analysis clarifies that conscientious efforts to integrate corporate and personal tax rates must make supporting changes in the size and character of capital-gains tax preferences built into the tax code.
As is true for all areas of financial management, working capital management is more complex for the multinational corporation (MNC) than for firms engaged in only domestic…
Abstract
As is true for all areas of financial management, working capital management is more complex for the multinational corporation (MNC) than for firms engaged in only domestic operations. Such incremental complexity is due to a number of reasons related to the effects of operating in diverse economic and political climates and tax jurisdictions. This article is concerned with selected aspects of how foreign exchange risk—the potential impact on a MNC's profitability, net cash flows, and market value of a change in exchange rates—may affect working capital management.