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| Author: | Kaufmann, D. J. Jr. Gitman, L. J. |
| Title: | The Tax Reform Act of 1986 and corporate investment decisions |
| Journal: | Engineering Economist
1988 : WINTER, VOL. 33:2, p.95-108 |
| Index terms: | TAXATION DECISION MAKING INVESTMENT DEPRECIATION PROJECTS |
| Language: | eng |
| Abstract: | There is a widespread belief that the Tax Reform Act of 1986 will negatively impact corporate investment decisions in the US. Using both expansion and replacement decision data four key changes are examined in light of their impact on internal rates of return: elimination of the investment tax credit; modification of asset deprecitation procedures; elimination of preferential treatment of long-term capital gains; and reduction of the marginal corporate income-tax rate. Findings reveal that while the impact of the Act can be either positive or negative, generally projects with high incremental earnings before depreciation and taxes will benefit under the new law, projects with lower incremental EBDT will be not so attractive. |
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