Accelerated depreciation and the efficacy of temporary fiscal policy : Implications for an inflationary economy
AbstractThe effect on investment of temporary tax rate changes depends on the age profile of depreciation deduct ions. If the depreciation allowance schedule is accelerated, then temporary cuts in the corporate tax rate could reduce investment. Inflation causes the age profile of real depreciation deductions to become accelerated and thus could make temporary tax cuts have a contractionary effect on investment. Two currently proposed reforms are shown to exacerbate this effect. Under these proposals, temporary tax cuts are likely to have opposite effects on investment in short-lived and long-lived capital, thereby complicating the conduct of countercyclical fiscal policy.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 19 (1982)
Issue (Month): 1 (October)
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Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- Andrew B. Abel, 1980. "Accelerated Depreciation and the Efficacy of Temporary Fiscal Policy: Implications for an Inflationary Economy," NBER Working Papers 0596, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eisner, Robert, 1969. "Fiscal and Monetary Policy Reconsidered," American Economic Review, American Economic Association, vol. 59(5), pages 897-905, December.
- Abel, Andrew B, 1981. "Taxes, Inflation, and the Durability of Capital," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 548-60, June.
- Gürtler, Marc & Sieg, Gernot, 2008.
"Crunch time: A policy to avoid the announcement effect when terminating a subsidy,"
Economics Department Working Paper Series
1, Technische Universität Braunschweig, Economics Department.
- Marc Gürtler & Gernot Sieg, 2010. "Crunch Time: A Policy to Avoid the 'Announcement Effect' when Terminating a Subsidy," German Economic Review, Verein für Socialpolitik, vol. 11, pages 25-36, 02.
- Gürtler, Marc & Sieg, Gernot, 2006. "Crunch time: The optimal policy to avoid the "Announcement Effect" when terminating a subsidy," Working Papers FW24V2, Technische Universität Braunschweig, Institute of Finance.
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