This paper overviews the issues connected with proposals to spur investment using tax incentives. There are four main conclusions: (1) The rate of net capital formation in the U.S. has declined very substantially. This decline has been associated with a sharp fall in the after tax return to...

This paper presents an analysis of the effects of tax policy on capital accumulation and valuation based on James Tobin's q theory of investment. As Tobin has explained, aggregate investment can be expected to depend in a stable way on q, the ratio of the stock market valuation of existing...