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Abstract

The purpose of this article is to empirically estimate the effects of the federal corporate income tax, dividend yield, and inflation on the rate of return in investor-owned electric utilities in the United States. Using data from the period before the seventies, some authors were able to show some evidence toward a partial shifting of the tax burden in regulated utilities. An attempt is made here to reexamine these findings and extend them into the eighties. The results point to a conclusion of a short-run partial shifting of about 60% in contrast to a mere 40% reported earlier. The results do not reject the hypothesis of a significant positive relationship between the dividend yield and the profit rate, contradicting the theory that dividend policy is irrelevant. Finally, there is some indication of a depressing effect of inflation on the rate of return during the most recent inflationary time period, 1974–1984.

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Further Evidence on the Shifting of Corporate Income Tax in Privately Owned Electric Utilities,1948–1984

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