The paper by Robert E. Hall and Dale W. Jorgenson examines the impact of tax policy on investment behavior in the United States, focusing on three major tax revisions: the adoption of accelerated depreciation methods in 1954, the reduction of equipment lifetimes in 1962, and the investment tax credit in 1962. The authors use a neoclassical theory of optimal capital accumulation to model the relationship between tax policy and investment expenditures. They estimate the cost of capital services and the distribution of investment expenditures over time, considering the effects of different depreciation methods and tax credits. The results show that tax policy significantly influences the level and timing of investment, with substantial shifts in the composition of investment between equipment and structures. The adoption of accelerated depreciation in 1954 led to a shift from equipment to structures, while the 1962 tax changes shifted investment back to equipment. The investment tax credit in 1962 had a particularly dramatic effect, stimulating investment in equipment. The authors conclude that tax policy is highly effective in altering investment behavior and that further liberalization of depreciation rules could have even more significant impacts.The paper by Robert E. Hall and Dale W. Jorgenson examines the impact of tax policy on investment behavior in the United States, focusing on three major tax revisions: the adoption of accelerated depreciation methods in 1954, the reduction of equipment lifetimes in 1962, and the investment tax credit in 1962. The authors use a neoclassical theory of optimal capital accumulation to model the relationship between tax policy and investment expenditures. They estimate the cost of capital services and the distribution of investment expenditures over time, considering the effects of different depreciation methods and tax credits. The results show that tax policy significantly influences the level and timing of investment, with substantial shifts in the composition of investment between equipment and structures. The adoption of accelerated depreciation in 1954 led to a shift from equipment to structures, while the 1962 tax changes shifted investment back to equipment. The investment tax credit in 1962 had a particularly dramatic effect, stimulating investment in equipment. The authors conclude that tax policy is highly effective in altering investment behavior and that further liberalization of depreciation rules could have even more significant impacts.