[The neutrality and equity aspects of the Accelerated Cost Recovery System (ACRS), which became part of the U.S. tax law in 1981, are examined using a Monte Carlo simulation. ACRS depreciation is found to be equivalent to general price-level adjusted (GPL) depreciation only at inflation rates of between nine and 13 percent. To the extent that corporations alter their production, investment, and financing activities as a result of inflationary misstatement, the post-1980 law is nonneutral during times of inflation. Further, ACRS will result in a substantial, disproportionate relative capital shift among industries during inflationary periods, which indicates the horizontal inequity of the post-1980 law. This capital shift will be largest for capital-intensive industries having long-lived assets, such as transportation, utilities, and real estate. Both nonneutrality and horizontal inequity lead to decreased economic efficiency and a deadweight loss to the economy.]

The neutrality and equity aspects of the Accelerated Cost Recovery System (ACRS), which became part of the U.S. tax law in 1981, are examined using a Monte Carlo simulation. ACRS depreciation is found to be equivalent to general price-level adjusted (GPL) depreciation only at inflation rates of between nine and 13 percent. To the extent that corporations alter their production, investment, and financing activities as a result of Inflationary misstatement, the post-1980 law is nonneutral during times of inflation. Further, ACRS will result in a substantial, disproportionate relative capital shift among Industries during Inflationary periods, which indicates the horizontal Inequity of the post-1980 law. This capital shift will be largest for capital-intensive industries having long-lived assets, such as transportation, utilities, and real estate. Both nonneutrality and horizontal Inequity lead to decreased economic efficiency and a deadweight loss to the economy.

[This study investigates the influence of both the state corporate income tax rate and the form of the income tax base structure on foreign investment in manufacturing assets. An econometric model of foreign investment is derived from a supply-oriented theory of regional investment. That is, the decision to develop productive capacity in one region as opposed to another is due to regional advantages. Empirical results suggest that tax structures that use the unitary method of accounting have a substantial impact on the amounts of foreign investment. On the other hand, business income tax rates appear to have little impact.]

This study investigates the influence of both the state corporate income tax rate and the form of the income tax base structure on foreign investment in manufacturing assets. An econometric model of foreign investment is derived from a supply-oriented theory of regional investment, That is, the decision to develop productive capacity in one region as opposed to another is due to regional advantages. Empirical results suggest that tax structures that use the unitary method of accounting have a substantial impact on the amounts of foreign investment. On the other hand, business income tax rates appear to have little impact.