What is the rationale for saying that the federal government provides a tax subsidy to corporate debtors?
A) Interest and principal payments are tax deductible.
B) Interest payments are tax deductible.
C) Principal payments are tax deductible.
D) 70% of interest payments are tax deductible.

Question

Quizplus · Accepted Answer

The rationale for saying that the federal government provides a tax subsidy to corporate debtors is that interest payments on corporate debt are tax deductible. This means that corporations can reduce their taxable income by deducting the amount of interest paid on their debt from their taxable income. Essentially, the government is providing a subsidy to encourage corporations to borrow money and invest in their businesses. However, this also means that the government is losing out on potential tax revenue.

What Is the Rationale for Saying That the Federal Government