In 2017, the Trump administration proposed changes to the federal tax code, including reducing the top corporate income tax rate from 35 percent to 15 percent. An article in the Wall Street Journal noted, “A tax overhaul could give companies more incentive to invest.”

a. What type of investments is the article referring to? Why would cutting the corporate income tax rate lead companies to engage in more investment?

b. Some policymakers and economists are critical of cuts in the corporate income tax rate because they argue that such cuts increase income inequality. Does the incidence of the corporate income tax matter in evaluating this argument? Briefly explain.