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) Seventy percent 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 companies can reduce their taxable income by the amount of interest they pay on their debt. This effectively lowers their tax liability and acts as a subsidy to their borrowing costs.

What Is the Rationale for Saying That the Federal Government