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Summers and Furman originally suggested that we should leave estimations of the tax plan's growth effects to the career government revenue scorers.Third, there are legitimate differences of opinion on how much and how quickly the tax plan will affect investment decisions (particularly equipment investments), and thus long-run economic growth. Summers' own research results dramatically drive home that point. Using data from a variety of countries and time periods, some as short as five years, he and Brad DeLong of the University of California, Berkeley, (who also opposes the current tax bill) have made the strongest case I know that equipment investment can have a large impact on GDP growth. Summers and DeLong attribute the large growth effects of equipment investment primarily to learning-by-doing effects, citing historical examples developed by, among others, my late Stanford University colleague Nathan Rosenberg.In an analysis of recent academic research, Oxford University's Michael Devereux finds that while marginal effective tax rates affect the level of business investment, the average effective rate has a much larger effect on where, internationally, investments are made. If he is right, then expensing and a higher tax rate – implying a low marginal and high average rate – would not be the best way to increase investment in the United States.
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