Sales Taxes, Investment, and the Tax Reform Act of 1986

David Joulfaian () and James B. Mackie

National Tax Journal, 1992, vol. 45, issue 1, 89-105

Abstract: Contrary to the conventional view on consumption taxes, state and local sales taxes extend to the acquisition of capital assets and are especially burdensome on equipment. These taxes partially offset allocational distortions caused by tax provisions present prior to the Tax Reform Act of 1986 (TRA). Consequently, the TRA.s modifications, especially the repeal of the investment tax credit, do less to improve the uniformity of the tax treatment of alternative investments than suggested in earlier work. This makes it less likely that the TRA generated an overall welfare gain.

Date: 1992
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