In the long run a corporate income tax that initially reduces the return to investment in the corporate sector will also:

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In the long run, a corporate income tax that reduces the return to investment in the corporate sector will lead to a reallocation of capital towards the noncorporate sectors. However, this increased demand for capital in the noncorporate sectors will eventually raise the price of capital there, thus reducing the return to capital in those sectors as well. This adjustment process ensures that in the long run, the return to capital becomes equalized across sectors, reflecting the decreased after-tax return in the corporate sector.

In the Long Run a Corporate Income Tax That Initially