In cross-national comparisons of governance and economic incomes
, protection of property and human rights, and the promotion of democratic institutions, the federal form performs significantly better than its alternatives: unitary democracy or dictatorships.
Sales of Product X are restricted to values ranging from 250,000 to 500,000 units to illustrate clearly the behavior of the two investment structures as the discounted values of their economic incomes intersect.
A firm's operating profit after taxes less the cost of capital used to generate the profit measures its economic income. In the 1990s, Stewart (1991) proposed a similar concept he referred to as economic value added (EVA) to evaluate a firm's performance.
Like accounting income, economic income is a periodic measure of performance.
However, unlike overhead-related cost, the cost of capital is subtracted from operating income after taxes to determine a product's economic income. Incorporating the cost of capital as an expense transforms ABC from a system for measuring a cost object's accounting income to measuring its economic income.
However, when the cost of capital is charged to a product as an expense, the difference between the product's revenue and expenses is its economic income. Unlike accounting profitability, economic income over a product's life must be discounted to when production of the product will begin.
As noted earlier, Hartman (2000) and Shrieves and Wachowicz (2001) provide mathematical proofs that discounting an investment economic income is equivalent to its NPV.
Therefore, for every additional unit of Product X sold each year over its three-year life, its discounted economic income will increase by $130.89.
As discussed in Item II.D., the AMT was designed to ensure that taxpayers with substantial economic incomes paid some tax.
When the AMT was enacted as part of the Tax Reform Act of 1986, Congress had "one overriding objective: to ensure that no taxpayer with substantial economic income can avoid significant tax liability by using exclusions, deductions, and credits." S.
Hence, the current system goes far beyond the goal of the AMT to tax "economic income."