Lifting the Burden: Tax Reform, the Cost of Capital, and U.S. Economic Growth.
This book presents the cost of capital approach to tax policy analysis. Jorgenson (1963) introduced the cost of capital almost forty years ago.
Chapter 1 shows how this concept became an essential tool for modeling the impact of tax policy on investment behavior.
Chapter 2 presents the conceptual framework and applies it to capital income taxation.
The widespread success of the cost of capital approach is due to its ability to assimilate virtually unlimited descriptive detail on alternative tax policies, as we demonstrate in our description of the U.S. tax system in Chapter 3.
Auerbach and Jorgenson (1980) introduced the closely related concept of the marginal effective tax rate, the focus of Chapter 4. This emerged from debates over tax reform in the United States, beginning with the Economic Recovery Tax Act of 1981 (ERTA) and culminating in the Tax Reform Act of 1986. The marginal effective tax rate brings out the distorting effects of speciﬁc tax provisions in a highly succinct and comprehensible way. Horizontal equity, the equal treatment of taxpayers in similar circumstances under the law, is achieved by equalizing marginal effective tax rates for all types of capital.
The next chapters are waiting to be discovered by the readers of this book.
The purpose of this book is to provide a comprehensive treatment of the cost of capital approach for analyzing the economic impact of tax policy.