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Tax Reform and the Cost of Capital$
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Dale W. Jorgenson and Kun-Young Yun

Print publication date: 1991

Print ISBN-13: 9780198285939

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198285930.001.0001

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The US Tax System

The US Tax System

Chapter:
(p.39) 3 The US Tax System
Source:
Tax Reform and the Cost of Capital
Author(s):

Dale W. Jorgenson (Contributor Webpage)

Kun‐Young Yun

Publisher:
Oxford University Press
DOI:10.1093/0198285930.003.0003

A quantitative and detailed description is presented of the US tax system and law, which begins by providing estimates of the rates of capital income taxation at both corporate and individual levels for the period 1947–86; property tax rates are also presented for household, non-corporate and corporate sectors. It is noted that the adoption of these tax preferences in the USA dramatically altered the incentives to invest in different types of assets and radically changed the distribution of the tax burden. Provisions are then discussed for capital cost recovery, including capital consumption allowances and the investment tax credit; next, a description is given of features of the financial structure of corporate and non-corporate businesses and households that affect the taxation of income from capital. Finally, the impact is considered of the Tax Reform Act of 1986 on the US tax system, especially in relation to the tax (financial) structure for income from capital; alternative approaches are considered. The data presented can be used to implement either the traditional or the new view of the corporate cost of capital.

Keywords:   capital consumption allowances, capital cost recovery, capital income taxation, capital income, corporate businesses, corporate taxation, financial structure, household taxation, investment incentives, investment tax credit, non-corporate businesses, non-corporate taxation, tax credits, tax preferences, US Tax Reform Act of 1986, US tax system, USA

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