The Psychology of Taxing Capital Income

Facebook CEO Mark Zuckerberg’s wealth has increased by over $100 billion since 2004, but he has paid relatively little income tax. Why? Because of the “realization rule:” Zuckerberg has not sold—and thus “realized” the gains on—the great majority of his Facebook shares, so he’s not taxed.  The realization rule creates a host of problems, including huge revenue losses and inefficient investment incentives.  Indeed, the Senate Finance Committee Chair plans to introduce a bill to repeal the rule for liquid assets for rich taxpayers. In a new article, we explore public attitudes toward taxing unsold gains and find the … Read more

Is There a Delaware Effect for Controlled Firms?

The effect of Delaware incorporation on firm value is an enduring question in corporate law.  Robert Daines shifted the terms of this debate in Does Delaware Law Improve Firm Value? (2001) by showing that publicly traded Delaware corporations, controlling for a number of other factors, were worth more money.  Daines interpreted this to mean that Delaware’s corporate law increased firm value, particularly as it relates to hostile takeovers.

In my paper, Is There a Delaware Effect for Controlled Firms?, I present new empirical evidence on whether the Delaware premium applies to firms for which takeover law is not relevant: … Read more