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Distortionary Impacts of the 1982 and 1986 U.S. Tax Codes on Capital Investments: A Case Study of Investment in Orange Groves

Published online by Cambridge University Press:  05 September 2016

Charles B. Moss ,
Ronald P. Muraro  and
William G. Boggess
Charles B. Moss
Affiliation:
Department of Food and Resource Economics, University of Florida, Gainesville
Ronald P. Muraro
Affiliation:
Department of Food and Resource Economics, University of Florida, Citrus Research and Education Center, Lake Alfred
William G. Boggess
Affiliation:
Department of Food and Resource Economics, University of Florida, Gainesville
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Abstract

The 1980s have been a period of dramatic change for the income tax code in the United States. Although numerous modifications were considered in policy deliberations, two key goals, the reduction of the importance of tax considerations in investment decisions and tax simplification, emerged from the discussion and guided drafting of the 1986 Tax Reform Act. This study examines the importance of tax considerations in investment decisions under the provisions of the Tax Reform Act of 1986 and its predecessor, the Tax Equity and Fiscal Responsibility Act of 1982. The study then compares the tax liability under these tax codes with a nondistortionary tax scheme. Results indicate that the Tax Reform Act of 1986 reduced the distortionary effects of the tax code on capital investment decisions. However, a large portion of the reduction can be attributed to the change in the average tax rate.

Keywords

investmentTax Reform ActTax Equity and Fiscal Responsibility Acttax distortions
Type
Submitted Articles
Information
Journal of Agricultural and Applied Economics , Volume 21 , Issue 2 , December 1989 , pp. 107 - 115
Copyright
Copyright © Southern Agricultural Economics Association 1989

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