Transcript Discussion Slides

Taxing Heterogeneous Capital,
or Not
Discussion of Auerbach slides
by Casey B. Mulligan
Many Different Types of Assets in the Economy
• Various physical assets with various depreciation rates
– e.g., Goolsbee dissertation
• Various locations and uses
– e.g., housing vs. business assets
• Tangible vs. intangible
– rents: what are they and what is their economic function?
– should negative rents be subsidized? If positive rents are taxed at higher
rates more than negative rents  tax arbitrage
• Significant deadweight losses from a failure to tax capital
uniformly
Capital Rental Rates through 2010 Q3
25%
8%
Residential
(right axis)
7%
20%
4%
10%
Nonresidential
(left axis)
3%
2%
5%
1%
Note: all 2005 values interpolated
between 2004:Q4 and 2006:Q1
08
-I
20
04
-I
20
00
-I
20
96
-I
19
92
-I
19
88
-I
19
84
-I
19
80
-I
19
76
-I
19
72
-I
19
68
-I
19
64
-I
19
60
-I
19
56
-I
19
52
-I
0%
19
48
-I
0%
annual rate
5%
15%
19
annual rate
6%
The Easiest Way to Uniformly Tax Heterogeneous Capital:
Leave it Untaxed!