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Junwook Yoo
 
''Progressive tax and responsiveness to changes in investment projects: no loss offset''
( 2023, Vol. 43 No.2 )
 
 
This study shows the comprehensive impact of tax progressiveness on investment. First, tax progressiveness makes an entrepreneur less responsive to changes in investment projects. When a tax becomes less (more) progressive, an entrepreneur becomes more (less) responsive to changes in the profitability and riskiness of investment projects. Second, tax asymmetries of progressive taxes and proportional taxes have opposite effects on the responsiveness of an entrepreneur to changes in investment projects. Confronting a progressive tax burden with no loss offset available, an entrepreneur less sharply adjusts the amount of investment in response to changes in the profitability and riskiness of investment projects while confronting a proportional tax burden with no loss offset available, an entrepreneur more sharply adjusts. The results suggest empirical and policy implications. 1) There exist interaction effects to measure between tax progressiveness and the profitability and riskiness of investment projects. 2) By adjusting tax asymmetries and progressiveness, tax jurisdictions are able to induce investors to be more (less) responsive to changes in investment projects which is to take a more (less) aggressive strategy.
 
 
Keywords: progressive tax, tax asymmetry, loss offset, investment sensitivity
JEL: M2 - Business Economics: General
H2 - Taxation, Subsidies, and Revenue: General
 
Manuscript Received : Feb 07 2022 Manuscript Accepted : Jun 30 2023

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