This report examines the taxation of corporate gains on depreciable business property, an important topic that has received little attention in the economic literature. The authors argue that current law, under which gains on those sales are taxed at ordinary tax rates and buyers are allowed to depreciate their purchase cost, places a tax penalty on sales and raises the cost of capital, thereby discouraging investment. In a simple model, they think, three policies would eliminate the impact on user cost and investment: zero taxation of capital gains with recapture of excess depreciation allowances at ordinary tax rates, zero taxation of capital gains with the seller's basis carrying over to the buyer, and reduced tax rates on capitalgains. The basis carryover and reduced-rate policies appear to the authors to be preferable in a more general framework.
What's new on AEI
|To secure southern border, US must lead international effort to stabilize Central America|
|The Ryan pro-work, anti-poverty plan: Thomas Aquinas 1, Ayn Rand 0|
|Does SNAP support work? Yes and no|
|Obama Democrats lose their big bet on health exchanges|
Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.
Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.