Investment Incentives and the Discounting of Depreciation Allowances
In: The Effects of Taxation on Capital Accumulation
This paper examines the discounting of depreciation allowances both theoretically and empirically. Economic theory suggests that depreciation tax shields should be discounted at the after tax riskless rates. However, a survey of 200 major corporations indicates that they employ much higher discount rates to depreciation allowances. Typical discount rates are in the 15 percent range. This finding suggests that "frontloaded" incentives like the ITC provide maximal stimulus to corporate investment.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
11352.||Handle:|| RePEc:nbr:nberch:11352||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
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.:
- Roger H. Gordon & James R. Hines, Jr. & Lawrence H. Summers, 1987.
"Notes on the Tax Treatment of Structures,"
in: The Effects of Taxation on Capital Accumulation, pages 223-258
National Bureau of Economic Research, Inc.
- Ruback, Richard S., 1986. "Calculating the market value of riskless cash flows," Journal of Financial Economics, Elsevier, vol. 15(3), pages 323-339, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:11352. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.