The Economic Recovery Tax Act of 1981 allowed firms to depreciate their capital at a very rapid rate for tax purposes. This
A) increased the tax liability of firms and discouraged them from investing.
B) decreased tax liability and encouraged investment.
C) increased the tax liability of firms and encouraged them to invest.
D) decreased tax liability and discouraged investment.

Question

Quizplus · Accepted Answer

The Economic Recovery Tax Act of 1981 allowed firms to depreciate their capital at a very rapid rate for tax purposes. This lowered their taxable income and thus decreased their tax liability, which in turn encouraged firms to invest more. Therefore, Choice B is the correct answer.

The Economic Recovery Tax Act of 1981 Allowed Firms to Depreciate