For more than 40 years, the Congressional Research Service (CRS) has maintained a model for estimating marginal effective tax rates (METRs) on new investment. This report uses the CRS model to provide estimates of METRs, which can be used to understand how changes to tax law affect the size and allocation of investment in the economy. It compares METRs across assets, sectors, and sources of finance, identifying which are treated more or less favorably by the tax system. The Appendices document the CRS model used to generate these estimates. The METR is a forward-looking measure that estimates, in present-value terms, the share of the rate of return on a prospective investment that is paid in taxes over the life of that investment. It differs from the statutory tax rate, which measures the rate on taxable income, and the average effective tax rate, which measures taxes paid in a year as a percentage of income. Under the current and past tax regimes, METRs are lowest on intangible assets, followed by equipment; oil, gas, and mining structures; and power structures in both the corporate and the noncorporate sectors. Manufacturing structures were provided more favorable treatment in the recent 2025 reconciliation law (P.L. 119-21), commonly known as the One Big Beautiful Bill Act (OBBBA). Some assets, notably research and development and certain other noncorporate intangible assets, as well as owner-occupied housing, are subject to subsidies (negative METRs). The highest METRs are on land, inventories, some nonresidential structures, and residential structures in that order. These METRs reflect the differences in the speed with which investment costs can be deducted, the research credit, and the exclusion of imputed rent on owner-occupied housing. The tax system heavily favors debt-financed investments over equity-financed investments. In the noncorporate sector, and for many assets in the corporate sector, debt-financed assets are subject to tax subsidies. Debt-financed assets are subject to subsidies or low tax rates because nominal interest rates are deducted while the returns on those investments are taxed at a lower rate, coupled with a limited amount of interest being subject to tax by creditors. Overall, assets in the noncorporate sector are taxed at higher rates than in the corporate sector, in part because the asset composition in the noncorporate sector is more heavily weighted toward assets with higher METRs.
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