Issues in the Design of Saving and Investment Incentives

Download or read book Issues in the Design of Saving and Investment Incentives written by David F. Bradford and published by . This book was released on 1981 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the characteristics of and interactions among measures to effect saving and investment incentives ("S-I incentives")in the context of an income tax system that is inadequately indexed for inflation. Examples are proposals for more rapid depreciation of buildings and equipment and proposals to exempt larger amounts of interest income. SI incentives are classified into "consumption tax" and "direct grant" types, and it is shown that these differ in their influence on portfolio choices, in their sensitivity to inflation and in the design problems they present. Stress is placed on requirements for neutrality with respect to asset durability and portfolio composition. A new result is the derivation of the reduction in interest taxation yielding neutrality in the presence of partial expensing of real investment or equivalent investment incentive