Abstract: This final chapter provides an evaluation of the cost of capital approach to tax policy analysis. This approach has amply proved its usefulness as a guide to tax reform. While the US tax policy changes of the early 1980s introduced additional barriers to efficient allocation of capital, the Tax Reform Act of 1986 reduced these barriers substantially. Important discrepancies remain, however, between effective tax rates on income from household and business assets (both corporate and non-corporate). Further reduction in these discrepancies presents an important opportunity for increasing the efficiency of capital allocation.

Keywords: capital allocation, capital income taxation, corporate businesses, corporate taxation, household taxation, households, marginal effective tax rates, non-corporate businesses, non-corporate taxation, tax policy, tax rates, US Tax Reform Act of 1986, USA,