Tax-Induced Slow Turnover of Capital

PRESENT DOLLARS are heavy dollars; future dollars are light dollars. The effort of taxpayers to retard tax liabilities and advance tax write-offs follows as the night the day, and economists understand the rudiments of this game: taxes deferred are taxes denied.

The economics profession has lagged in developing capital theory and more so in incorporating it in its teachings. It is catching up, but the particular application to tax policy still lags. This is a serious omission, since taxation has the most profound effects on the intertemporal allocation of resources and, by retarding replacement of capital, on gross investment and national income.