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A Further Look at the Effect of Federal Tax Laws on Optimal Machinery Replacement

Published online by Cambridge University Press:  05 September 2016

Larry W. VanTassell  and
Clair J. Nixon
Larry W. VanTassell
Affiliation:
Department of Agricultural Economics, University of Tennessee
Clair J. Nixon
Affiliation:
Department of Accounting, Texas A&M University
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Abstract

Self-employment taxes, “effective” marginal tax rates, and discounting schemes which allow for alternative purchase and disposal dates of machinery are incorporated into the traditional optimal replacement interval model. Empirical results indicate that these alterations decrease the optimal replacement intervals by up to three years from those obtained with traditional modeling assumptions. Inclusion of self-employment taxes decreases both the penalty attached to early replacement and the net present value (cost) of tractor ownership.

Keywords

replacementincome taxesself-employment taxes
Type
Submitted Articles
Information
Journal of Agricultural and Applied Economics , Volume 21 , Issue 2 , December 1989 , pp. 77 - 84
Copyright
Copyright © Southern Agricultural Economics Association 1989

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