Irreversible Capital Accumulation and Non-Linear Tax Policy
نویسندگان
چکیده
We analyze the impact of tax progression on optimal investment policy and its value by first demonstrating that optimal investment policy maximizes the value of the firm and the rate at which it is growing as a function of operating capital stock. Then we show that three possible optimal regimes arise depending on the nature of tax policy. If the exogenously given progression threshold lies between the optimal capital stocks in the case of higher and lower marginal profit taxes, then optimal policy is independent of profit tax rates. Outside this corner solution optimal investment policy is conventional.
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Irreversible Capital Accumulation and Nonlinear Tax Policy: A Note
We analyze the influence of tax progression on optimal investment policy and its value. We show that three possible optimal regimes arise, depending on the nature of the tax policy. If the exogenously given progression threshold lies between the optimal capital stocks in the case of higher and lower marginal profit taxes, then the optimal investment policy is independent of profit tax rates. Bu...
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