Taxes, Loans, and Inflation: How the Nation's Wealth Becomes Misallocated
Income from capital receives uneven treatment in both the tax system and the loan markets. This affects almost every investment decision make by the individuals, business, and government and causes major disruptions in the economy. In this book C. Eugene Steuerle shows how the misallocation of capital results from the interaction of tax laws, the operation of the market for loanable funds, and inflation. He first analyzes the taxation of capital income, focusing on the distortions caused by tax arbitrage and on inflation-induced discriminations among both taxpayer and borrowers. The author then applies this analysis to several related issues. He concludes with a reform agenda that calls for the adoption of a broader-based, flatter-rate income tax.
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Taxation of the Capital Income of Individuals
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accounting after-tax rate amount billion borrow to purchase breakeven capital gains capital income cash flow consumption corporate income corporate tax cost debt deferred depreciation dividends dollars economic income efficiency equal equipment equity excluded expenditure tax financial arbitrage firms flat tax flat-rate tax futures contract income from capital increase indexing individual income tax inflation rate inflationary instance interest deductions interest income interest payments interest rate interest receipts interest-bearing assets Internal Revenue Service inventory investment incentives investors leasing LIFO loan markets loanable funds losses marginal tax rate measure National Tax Journal negative nontaxable normal tax arbitrage offset paid pension percent persons portfolio postwar preferred assets profits progressive tax pure tax arbitrage rate of inflation rate of return rate of tax real assets real income recognized risk sector sources tax preferences tax reduction tax returns tax shelters tax system taxable income taxpayers types wage zero