Assuming that the corporate income tax is not shifted to consumers in the short run, the long-run effect will be a reduction in the return to investment in both the corporate and noncorporate sector.

Question

Quizplus · Accepted Answer

In the long run, the corporate income tax can lead to lower profits for corporations, which can reduce the return on investment for both the corporate and noncorporate sector. As a result, investors may shift their investments to other countries or sectors with lower tax rates, leading to a reduction in overall investment and economic growth over time.

Assuming That the Corporate Income Tax Is Not Shifted to Consumers