The legislature in Tuneria has just passed a new law which will provide a large investment tax credit in one year. What pattern of investment would you expect to see over the next two years? What implications would this have for estimates of the elasticity of investment with respect to investment tax credits?
Answer to relevant QuestionsWhy does redistribution cause efficiency losses? Why might society choose to redistribute resources from one group to another when doing so reduces the overall size of the economic pie? Proper hygiene, such as regular hand-washing, can greatly limit the spread of many diseases. How might this suggest a role for public interventions? What kinds of public interventions might be possible? Suggest three ...Reducing corporate tax rates is often considered as a policy tool to enhance investment. How could the presence of tax loopholes diminish the relationship between corporate tax rates and corporate investment? Imagine that a $30,000 investment in a good is expected to return you $25,000, and your marginal tax rate is 30%. The government is considering an investment tax credit that reduces the price of the investment. How large ...Suppose that the tax rate is 30%. Suppose also that the probability of getting caught evading taxes is 10% plus an additional 2.5% for every $1,000 in tax evasion. (Hence, P = 0.1 + 0.025X, where X is the number of dollars ...
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