Tax Reform and the Cost of Capital
Dale W. Jorgenson and Kun-Young Yun
Abstract
The concept of ‘cost of capital’ was introduced almost thirty years ago and quickly became an indispensable tool for modelling the impact of tax policy on investment behaviour. In the 1980s it assumed a central role in tax reform debates through the closely related concept of the marginal effective tax rate. This book provides a comprehensive treatment of the cost of capital approach to tax policy analysis. In order to make the approach as accessible as possible, the analytical level of the book has been kept to an absolute minimum. The complexities are introduced in a step-by-step fashion, le ... More
The concept of ‘cost of capital’ was introduced almost thirty years ago and quickly became an indispensable tool for modelling the impact of tax policy on investment behaviour. In the 1980s it assumed a central role in tax reform debates through the closely related concept of the marginal effective tax rate. This book provides a comprehensive treatment of the cost of capital approach to tax policy analysis. In order to make the approach as accessible as possible, the analytical level of the book has been kept to an absolute minimum. The complexities are introduced in a step-by-step fashion, leading up to a representation of tax systems for capital income that is suitable for tax policy analysis. The success of the cost of capital approach is due in large part to its ability to assimilate a virtually unlimited amount of descriptive detail on alternative tax policies. In order to provide guidance to students and practitioners, the book contains a full implementation of the approach for the USA, including an analysis of the alternative proposals that culminated in the highly influential Tax Reform Act of 1986. The chapters of the book are the first in a series of Lectures in Monetary and Fiscal Policy given at Uppsala University in honour of Erik Lindahl, the Swedish economist who was a professor there from 1942 to 1958.
Keywords:
capital income,
cost of capital,
investment behaviour,
marginal effective tax rate,
modelling,
tax policy,
tax reform,
tax systems,
US Tax Reform Act of 1986,
USA
Bibliographic Information
| Print publication date: 1991 |
Print ISBN-13: 9780198285939 |
| Published to Oxford Scholarship Online: November 2003 |
DOI:10.1093/0198285930.001.0001 |
Authors
Affiliations are at time of print publication.
Dale W. Jorgenson, author
Harvard University, Vice President of the Econometric Society
Author Webpage
Kun-Young Yun, author
Yonsei University
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