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Cited by 2,898Fiscal Policies and Political EconomyEconomic and Fiscal StudiesCorporate Finance and Governance

DEBT AND TAXES*

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Miller, Merton H.·1977·The Journal of Finance
DOI 10.1111/j.1540-6261.1977.tb03267.x
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Abstract

THE SOMEWHAT HETERODOX VIEWS about debt and taxes that will be presented here have evolved over the last few years in the course of countless discussions with several of my present and former colleagues in the Finance group at Chicago-Fischer Black, Robert Hamada, Roger Ibbotson, Myron Scholes and especially Eugene Fama.Charles Upton and Joseph Williams have also been particularly helpful to me recently in clarifying the main issues.'My long-time friend and collaborator, Franco Modigliani, is absolved from any blame for the views to follow not because I think he would reject them, but because he has been absorbed in preparing his Presidential Address to the American Economic Association at this same Convention

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  • In Miller's theory, personal income taxes on interest payments would exactly offset the corporate interest tax shield, provided the firm pays the full statutory tax rate.

    “In Miller's theory, the personal income taxes on interest payments would exactly offset the corporate interest tax shield, provided that the firm pays the full statutory tax rate.”

    From The Capital Structure Puzzle (1984) · cites this paper as [27]

    In “Market Equilibrium and the Behavior of Firms and Individuals” (page unavailable), Miller says personal taxes on bond interest can offset the corporate benefit of deductible interest, and that the offset is one-for-one when the relevant tax rates satisfy a specified relationship. Paying the full statutory corporate tax rate alone does not establish that relationship; the personal tax rates on bond and stock income also matter. (LLM, conf=0.87)

    Experimental — accuracy not yet measured

  • Miller's model describes an equilibrium of aggregate supply and demand for corporate debt in which personal income taxes paid by the marginal investor in corporate debt just offset the corporate tax saving.

    “Miller described an equilibrium of aggregate supply and demand for corporate debt, in which personal income taxes paid by the marginal investor in corporate debt just offset the corporate tax saving.”

    From The Capital Structure Puzzle (1984) · cites this paper as [27]

  • In Miller's model, since the equilibrium only determines aggregates, debt policy should not matter for any single taxpaying firm.

    “However, since the equilibrium only determines aggregates, debt policy should not matter for any single taxpaying firm.”

    From The Capital Structure Puzzle (1984) · cites this paper as [27]

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Cites

No references could be resolved yet.

Research works printed but not linked: 28

  1. Victor L. Andrews. "Captive Finance Companies," Harvard Business Review, Vol. 42 (July-August 1964), 80-92.
  2. - . "Progressivity and Investment Yields under U.S. Income Taxation," Journal of Political Economy, Vol. 82, No. 6 (Nov./Dec. 1974), 1157-75. · DOI
  3. Ku B. Bhatia. "Capital Gains and Inequality of Personal Income: Some Results From Survey Data," Journal of the American Statistical Association, Vol. 71, No. 355 (September 1976), 575-580. · DOI
  4. Nevins Baxter. "Leverage, Risk of Ruin and the Cost of Capital," Journal of Finance, Vol. 22, No. 3 (September 1967), 395-403. · DOI
  5. Fischer Black. "Bank Funds Management in an Efficient Market," Journal of Financial Economics, Vol. 2, No. 4 (December 1975). · DOI
  6. and Myron Scholes. "The Effects on Dividend Yield and Dividend Policy on Common Stock Prices and Returns," Journal of Financial Economics, Vol. 1, No. 1 (May 1974), 1-22. · DOI
  7. J. H. Coates and P. K. Wooley. "Corporate Gearing in the E.E.C.," Journal of Business Finance and Accounting, Vol. 2, No. 1 (Spring 1975), 1-18. · DOI
  8. David Durand. "The Cost of Capital, Corporation Finance and the Investment: Comment," American Economic Review, Vol. 49, No. 4 (Sept. 1959), 39-55.
  9. Donald Farrar and Lee L. Selwyn. "Taxes, Corporate Policy, and Returns to Investors," National Tax Journal, Vol. 20, No. 4 (December 1967), 444 54.
  10. R. Alton Gilbert. "Bank Financing of the Recovery," Federal Reserve Bank of St. Louis Review, Vol. 58, No. 7, 2-9.
  11. David W. Glenn. "Super Premium Security Prices and Optimal Corporate Financial Decisions," Journal of Finance, Vol. 31, No. 2 (May 1976), 507-24. · DOI
  12. Robert Hamada. "Discussion," Journal of Finance, Vol. 31, No. 2 (May 1976), 543-46. · DOI
  13. Ronald W. Masulis. "The Effects of Capital Structure Change on Security Prices," Graduate School of Business, University of Chicago, May 1976 (multilith). · DOI
  14. J. Huston McCulloch. "The Tax Adjusted Yield Curve," Journal of Finance, Vol. 30, No. 3 (June 1975), 811-30. · DOI
  15. Merton H. Miller. "The Corporation Income Tax and Corporate Financial Policies," In Stabiliza- tion Policies, Commission on Money and Credit, Prentice Hall, 1963.
  16. and Franco Modigliani. "Dividend Policy, Growth and the Valuation of Shares," Journal of Business, Vol. 34, No. 4 (October 1961), 411-33. · DOI · Paper page
  17. and Charles W. Upton. "Leasing, Buying and the Cost of Capital Services." Journal of Finance (June 1976).
  18. Franco Modigliani and Merton H. Miller. "Corporate Income Taxes and the Cost of Capital: A Correction," American Economic Review, Vol. 53, No. 3 (June 1963), 433-43.
  19. and . "The Cost of Capital, Corporation Finance and the Theory of Investment," American Economic Review, Vol. 48, No. 3 (June 1958), 261-97.
  20. and . "Reply to Heins and Sprenkle," American Economic Review, Vol. 59, No. 4, Part I (September 1969).
  21. Stewart C. Myers. "Taxes, Corporate Financial Policy and the Return to Investors: Comment," National Tax Journal, Vol. 20, No. 4 (Dec. 1967), 455-62.
  22. Sidney M. Robbins. "A Bigger Role for Income Bonds," Harvard Business Review (November- December 1955).
  23. "An Objective Look at Income Bonds," Harvard Business Review (June 1974).
  24. Arnold W. Sametz. "Trends in the Volume and Composition of Equity Finance," Journal of Finance, Vol. 19, No. 3 (September 1964), 450-469. · DOI · Paper page
  25. Eli Schwartz and J. Richard Aronson. "Some Surrogate Evidence in Support of the Concept of Optimal Financial Structure," Journal of Finance, Vol. 22, No. 1 (March 1963), 10-18. · DOI
  26. Eli Shapiro. "The Postwar Market for Corporate Securities: 1946-55," Journal of Finance, Vol. 14, No. 2 (May 1959), 196-217. · DOI
  27. R. C. Stapleton. "Taxes, the Cost of Capital and the Theory of Investment," The Economic Journal, Vol. 82 (December 1972), 1273-92. · DOI
  28. Joseph Stiglitz. "Taxation, Corporate Financial Policy, and the Cost of Capital," Journal of Public Economics, Vol. 2, No. 1 (February 1973), 1-34. · DOI

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Authors
Miller, M. H.
Affiliations
University of Chicago (US)
Corresponding author
Miller, Merton H.
Venue
The Journal of Finance
Publisher
Wiley
Published
1977-05
Volume
32
Issue
2
Pages
261-275
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/j.1540-6261.1977.tb03267.x
OpenAlex
W2153524047
Cited by
2,898
References
0
Citations by year
2026: 17 · 2025: 36 · 2024: 22 · 2023: 29 · 2022: 22 · 2021: 71 · 2020: 72 · 2019: 73 · 2018: 83 · 2017: 89 · 2016: 106 · 2015: 129 · 2014: 152 · 2013: 168 · 2012: 162
FWCI
116.02
Type
journal article
Language
en
Open access
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor, 12783 d)
Locations
The Journal of Finance (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policies and Political Economy
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
  • Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
Keywords
debt, taxation, capital structure, corporate finance, tax policy, debt financing

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