The Ineffectiveness of Effective Tax Rates on Business Investment / Robert S. Chirinko.

By:

Chirinko, Robert S

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1704.Publication details: Cambridge, Mass. National Bureau of Economic Research 1985.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: In his Fisher-Schultz Lecture, Martin Feldstein examined the effects of non-neutral tax rules on business investment by estimating three econometric models, and he concluded that "the rising rate of inflation has, because of the structure of existing U.S. tax rules, substantially discouraged investment in the past 15 years." In a detailed examination of Feldstein's Effective Tax Rate model and a less extensive review of his other formulations (Neoclassical and Return-Over-Cost models), a number of important and independent criticisms are advanced. Our results from examining all three models suggest strongly that taxes have not adversely affected capital formation during the recent episode of inflation, a conclusion consistent with the relatively robust levels of net investment between 1965 and 1981 actually shown in the newly benchmarked National Income data.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w1704 (Browse shelf(Opens below))	Not For Loan

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September 1985.

In his Fisher-Schultz Lecture, Martin Feldstein examined the effects of non-neutral tax rules on business investment by estimating three econometric models, and he concluded that "the rising rate of inflation has, because of the structure of existing U.S. tax rules, substantially discouraged investment in the past 15 years." In a detailed examination of Feldstein's Effective Tax Rate model and a less extensive review of his other formulations (Neoclassical and Return-Over-Cost models), a number of important and independent criticisms are advanced. Our results from examining all three models suggest strongly that taxes have not adversely affected capital formation during the recent episode of inflation, a conclusion consistent with the relatively robust levels of net investment between 1965 and 1981 actually shown in the newly benchmarked National Income data.