Special Report on
The Marginal Source of Finance
The Marginal Source of Finance - Trends
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Under the new view' of dividend taxation developed in Auerbach (1979), Bradford (1981) and King (1977) the marginal source of finance for new investment projects is retained earnings. In this case, the tax advantage of retentions precisely offsets the double taxation of subsequent dividends: taxes on dividends have no impact on the investment incentives of firms using retentions as a marginal source of funds and paying dividends with residual cash flows. We find evidence that dividends do respond to investment and cash flow for the nonfinancial corporate sector as a whole in a manner consistent with the new view. We also ...
It's a good time to teach macro, as there's almost limitless material (for instance, one could have students critique the President's principles, here ) being provided by the ongoing debate over the desirability (see Jim's post ) and optimal structure of a discretionary fiscal stimulus (see my previous post ). One of the proposals I've heard mooted is for accelerated depreciation for capital investment (see  ;  ). There's no doubt that there's trouble coming on the investment front, given that nonresidential investment typically lags residential ... Read More
SURVEY RESULTS FOR
THE MARGINAL SOURCE OF FINANCE
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Thrift Savings Plan Webcast
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