Treasury proposal will increase, not decrease, investment
Purchase Print Copy
|Add to Cart||Paperback6 pages||$20.00||$16.00 20% Web Discount|
This paper considers the impact on capital investment of the Treasury tax reform proposal that would eliminate the investment tax credit, lengthen the write-off periods for capital goods, and index the write-offs to inflation. The authors argue that the assertion by business groups that the proposal would reduce investment is erroneous because it only considers the impact of the cost of capital, and therefore ignores an important factor: the higher after-tax cost of capital must be balanced against the higher after-tax revenue from capital. They find that the Treasury proposal would actually increase the incentives for most categories of capital investment when compared to the present tax law.
This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.