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Distortionary Impacts of the 1982 and 1986 U.S. Tax Codes on Capital Investments: A Case Study of Investment in Orange Groves

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  • Moss, Charles B.
  • Muraro, Ronald P.
  • Boggess, William G.

Abstract

The 1980s have been a period of dramatic change for the income tax code in the United States. Although numerous modifications were considered in policy deliberations, two key goals, the reduction of the importance of tax considerations in investment decisions and tax simplification, emerged from the discussion and guided drafting of the 1986 Tax Reform Act. This study examines the importance of tax considerations in investment decisions under the provisions of the Tax Reform Act of 1986 and its predecessor, the Tax Equity and Fiscal Responsibility Act of 1982. The study then compares the tax liability under these tax codes with a nondistortionary tax scheme. Results indicate that the Tax Reform Act of 1986 reduced the distortionary effects of the tax code on capital investment decisions. However, a large portion of the reduction can be attributed to the change in the average tax rate.

Suggested Citation

  • Moss, Charles B. & Muraro, Ronald P. & Boggess, William G., 1989. "Distortionary Impacts of the 1982 and 1986 U.S. Tax Codes on Capital Investments: A Case Study of Investment in Orange Groves," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 21(2), pages 107-115, December.
    • Handle: RePEc:cup:jagaec:v:21:y:1989:i:02:p:107-115_00
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    References listed on IDEAS

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    1. Paul A. Samuelson, 1964. "Tax Deductibility of Economic Depreciation to Insure Invariant Valuations," Journal of Political Economy, University of Chicago Press, vol. 72, pages 604-604.
    2. Gregory D. Hanson & Diane R. Bertelsen, 1987. "Tax Reform Impacts on Agricultural Production and Investment Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(5), pages 1013-1020.
    3. Ronald D. Kay & Edward Rister, 1976. "Effects of Tax Depreciation Policy and Investment Incentives on Optimal Equipment Replacement Decisions: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(2), pages 355-358.
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