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If the 401(k) plan gets scrapped over Trump's tweet threats, then it's possible the deductibility limit could climb". — Nov. 6 markup.
In comparison to the models in which the tax deductibility limit only affects the fixed salary component, here the principal has no incentive to substitute fixed salary with variable salary.
(2001) study the consequences of a tax deductibility limit on fixed salary in a binary agency model and show that the marginal cost of inducing effort is reduced compared to the case where the manager's salary is fully tax-deductible.
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Corporate tax deductibility limits on managerial compensation induce incentive schemes that reward managers for luck.
Voßmerbäumer (2012) LEN model How do tax deductibility limits on total compensation affect managerial compensation packages?
(2001) Binary moral hazard model with continuous effort How do tax deductibility limits affect managerial incentives and decisions?
(If for some reason you bump up upon federally imposed deductibility limits, the excess can be written off in future years).
Göx (2008) LEN model, cash flow comprises two uncontrollable random factors How do tax deductibility limits on fixed managerial compensation influence the design of incentive contracts?
Recent discussions in Europe, particularly in Germany, motivated Voßmerbäumer (2012) to analyze how tax deductibility limits placed on total managerial compensation influence incentives.
(2001) Binary moral hazard model with continuous effort How do tax deductibility limits on fixed compensation affect managerial incentives and decisions?
Corporate tax deductibility limits on fixed compensation components induce a shift to variable compensation while raising the manager's expected total compensation.
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