Financial reverse engineering

Da Wolf, at it again.

First, it would be extremely helpful to reform the taxation of companies, to promote investment. In an interesting discussion of this issue, Andrew Smithers of Smithers & Co argues that a radical reform of corporation tax, to end interest deductibility, offset by a lower rate of tax would reduce indebtedness and lower the pre-tax return needed to achieve a given post-tax return on equity. The result should be a bigger capital stock. Such a measure could be combined with higher deductibility of investment, which would be helpful to manufacturing.