The Net Investment Income Surtax: Is One of the Newest Medicare Taxes Negatively Affecting Investment Activity in Small Business?
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Date
2016-05
Authors
Adams, Kyle Scott
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon
Abstract
The Net Investment Income Surtax is an additional income tax that was primarily
implemented in 2013 to raise funds for the Patient Protection and Affordable Care Act of
2010. It accomplishes this by charging an additional 3.8% tax either an individual's Net
Investment Income or on their Modified Adjusted Gross Income less a threshold
deduction. However, this surtax may have the unintentional side effect of negatively
impacting investment activity in small business, specifically in regards to Initial Public
Offerings held by businesses looking to expand, and this study looks to identify any
correlation between the Net Investment Income Surtax and annual IPOs.
In this study, the key economic variables that a business must consider before
launching a successful IPO have been isolated and examined. This is because these
variables must be favorable before a business will decide to launch their IPO. With these
variables, this study has created a multiple regression model that tracks the number of
IPOs each year from 1985 to 2012, from which a regression formula was created. The
regression formula was then used to isolate the effect that the Net Investment Income
Surtax had on the number ofIPOs launched after its initiation in 2013.
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The result of this study was that the NII surtax does not have a significant
influence, negative or positive, over small business investment activity. Instead, the
results suggest that favorable market conditions are much more important to businesses
looking to have an IPO. That being said, this does not necessarily mean that the NII
surtax will never significantly affect small business investment activity, so we must
remain vigilant towards it and other taxes and economic impositions that target specific
demographics.
Description
94 pages. A thesis presented to the Department of Accounting and the Clark Honors College of the University of Oregon in partial fulfillment of the requirements for degree of Bachelor of Arts, Spring 2016.
Keywords
Tax, Investing activity, Small business, IPO, Multiple regression model, Economic influence