Recent U.S. Investment Incentives
December 1, 1993
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Summary
The apparent slowdown in U.S. investment and productivity growth in recent years has led to a number of proposals to stimulate investment through the adoption of tax incentives. This paper describes the incentives that were contained in the February 1993 Budget and estimates their effect on the user cost of capital. The recent evidence regarding the effect of tax changes on investment in the United States is reviewed, and the likely effect of the Budget’s proposals on investment and overall economic activity is simulated. The simulations suggest that the proposals would have had a stimulative but largely transitory effect on U.S. investment and output.
Subject: Corporate income tax, Depreciation, Investment incentives, National accounts, Tax allowances, Tax incentives, Taxes
Keywords: Corporate income tax, cost of capital, demand result, Depreciation, gross investment, investment, investment demand, Investment incentives, investment tax credit, ITC rate, reintroduction of the investment tax credit, stimulus proposal, Tax allowances, tax incentive, Tax incentives, user cost of capital, WP
Pages:
24
Volume:
1993
DOI:
Issue:
092
Series:
Working Paper No. 1993/092
Stock No:
WPIEA0921993
ISBN:
9781451951455
ISSN:
1018-5941
Notes
Describes the incentives that were contained in the February 1993 Budget and estimates their effect on the use cost of capital.
