Assuming that corporations maximize profits and investors seek to maximize the return to their investments, the long-run impact of a corporate income tax is to:

Question

Quizplus · Accepted Answer

The long-run impact of a corporate income tax is to reduce the after-tax return to investors, thus reducing the incentive to invest in corporations. This leads to a reduction in the supply of funds available for investment and, as a result, a reduction in the level of investment in the economy. This reduction in investment, in turn, reduces the level of productivity and economic growth, leading to lower incomes for workers and investors alike. Therefore, the answer is C - reduce the incomes of all investors.

Assuming That Corporations Maximize Profits and Investors Seek to Maximize