The Interaction of Tax and Financial Accounting on Tax Reform
Statement Submitted for the Record

View the full statement here. 

While reducing statutory rates would provide a benefit to existing investments and improve the valuation of the company from the point of view of the shareholders, expanding expensing and accelerated depreciation provisions would generate returns over the lifetime of the company by improving cash flows and thereby enhancing firm value. Both types of reforms are critical to firms that are deciding what new investments to undertake and which activities will generate the highest return. In economic terms, the user cost of capital, or the implicit annual cost of investing in physical capital, is determined by not only the headline corporate tax rate, but also other factors such as the rate of depreciation as well as the interest rate. Therefore, any changes to either the tax rates or the provisions affecting the return from capital, would lead to a change in the user cost, which would affect physical capital investments by firms. 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Aparna
Mathur

What's new on AEI

Defeating ISIS: AEI experts weigh-in before the president’s address on Wednesday
image Degrading, defeating, and destroying the Islamic State
image Wealth Building Home Loan: Building wealth through homeownership and retirement savings
image The $3 iPhone
AEI on Facebook
Events Calendar
  • 15
    MON
  • 16
    TUE
  • 17
    WED
  • 18
    THU
  • 19
    FRI
Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.