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Veteran Advisor

Business investment tax credits


"Econometric research has commonly found that tax policy and the cost of capital have little effect on real investment."


"In addition to their large revenue costs, investment tax subsidies may give large, unintended rents to capital suppliers without increasing real investment until several years later because of the short-run asset price responses of capital goods. For policy makers interested in using tax policy to stimulate investment or, especially, to smooth business cycle fluctuations, the results are not promising."    


In the "don't confuse us with the facts" department, or at least "with some empirical research", investment tax credits probably don't do a great deal other than provide a windfall to companies like Deere, dealers, techs, autos etc.


In this surreal world, it doesn't matter anyway. The Obama proposal is straight from the US Chamber wish list but Republicans panned it from the get go. Dems are also running away from it- nobody wants to be associated with a "stimulus" before the elections.


Much woe to come either way but I wish I'd taped some of the multitude of investment types on the tube who are certain that "gridlock is good."  


One thing I can tell you with 100% absolute certainty- the present setup is about as far from 1994 as you could imagine.


Best, h