Your mayor wants voters in your town to approve a $24 million per year property tax break for Acme Manufacturing, in order to keep Acme from moving their operations out of state. Acme only produces output, and has a payroll, worth $6 million per year. In terms of income multiplier effects, under what circumstances might this tax break be a good idea?
If the income multiplier is greater than or equal to 4, then this tax break may be worth it. If Acme leaves,
incomes will fall initially by $6 million, but the multiplier effect on your town's economy will be much
larger. If the multiplier is 4 then the overall effect will be $24 million. Therefore, voters should be willing
to pay up to $24 million to keep Acme in town. If the income multiplier is less than 4, then the overall
effect on your town's economy will be less than $24 million, and the tax break is a bad idea .
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In effect, the U.S. does subsidize high-tech firms by subsidizing R&D. This is done through
A) the budget of the Department of Education. B) systematic protection through the levying of tariffs. C) systematic protection through the establishment of NTBs. D) relatively accelerated "depreciation" of R&D investment in the Federal tax codes. E) subsidies for high-tech firms.
The high tech boom of the late 1990s and early 2000s came to an end in part because
A) investment to address the Y2K problem was temporary. B) new computer applications were consumer oriented rather than directed at increasing productivity. C) the fiber optic cable boom has resulted in most optic cable capacity being unused. D) All of the above.