Tax policy,capital use,and investment incentives |
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Authors: | William E Schworm |
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Institution: | University of British Columbia, Vancouver, B.C., Canada V6T 1W5 |
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Abstract: | In this paper, we investigate the effect of a corporate income tax on the utilization and maintenance of capital and on the demand for capital stock and services. We find that a tax that allows interest deductions is distortionary unless allowable depreciation depends on the firm's utilization and maintenance decisions. Also, we show that the usual demand equation for capital stock is misspecified if capital utilization is not a technological constant. |
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