The Indexation of Interest, Depreciation, and Capital Gains: A Model ofInvestment Incentives

Don Fullerton ()

No 1655, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite much recent interest in a consumption tax, the Treasury Department's November 1984 tax plan proposes to adopt carefully coordinated features of a more comprehensive income tax, including the indexation of interest, depreciation, and capital gains.The May 1985 White House proposal would retain some of these indexing provisions.This paper looks at the incentives under alternative tax regimes to make marginal investments in the corporate sector, noncorporate sector, and in owner-occupied housing. It finds that the current system is characterized by effective tax rates that increase with inflation for some assets and decrease with inflation for other assets. Overall rates fall with inflation, and the corporate tax is completely offset by credits, allowances, and deductions. Under the Treasury or White House plans, the corporate tax re-emerges, effective tax rates are considerably more uniform, and the interference of inflation is virtually eliminated.

Date: 1985-06
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Fullerton, Don. "The Indexation of Interest, Depreciation, and Capital Gains and Tax Reform in the United States," Journal of Public Economics, Vol. 3 2, No. 1, February 1987, pp. 25-51.

Downloads: (external link)
http://www.nber.org/papers/w1655.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1655

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1655

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().