INFLATION AND THE DISTRIBUTION OF THE CORPORATE INCOME TAX BURDEN: ABSTRACT

This paper assesses the nature and extent of the effects of inflation upon the cross-sectional distribution of the corporate income tax burden from 1961 through 1984. The purpose of the study is to determine to what extent, if any, the failure to index the tax system has been mitigated by existing features of the tax code. The study shows that some of the major effects of inflation upon the distribution of the corporate tax burden have been offset by liberalized investment tax credits, increased acceleration of depreciation allowances, and the deductibility of nominal, rather than real interest expense. However, even after taking into account these offsetting effects, an important re- maining impact of inflation appears to have been a magnification of the already- existing cross-industry dispersion in real effective tax burdens.