Corporate income is taxed twice-once in the form of corporate income tax and the second time when the owner must pay income tax on dividends. What are the effects of this double taxation?
In equilibrium, investors do not lose by choosing to invest in a corporation. The risk-adjusted return must be the same for both types of investments. Corporations will be forced to avoid some investment opportunities that partnerships or proprietorships can consider. By avoiding opportunities with a positive but low expected return, corporations earn a higher return on their funds. Further, the prices of other investment opportunities will adjust to reflect the double taxation of corporate income. One can expect, therefore, no difference in the return on either type of investment.
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Which of the following statements about employer prejudice is true?
a. It would be impossible for employer prejudice to exist in a firm that sells its output in a competitive market unless all rivals also discriminate. b. Economic theory tells us that it would be impossible for employer prejudice to exist in a firm that is a monopoly. c. Employer prejudice will help a monopolist to increase his profits by satisfying his managers personal prejudices. d. Legislation has ended employer prejudice in the United States. e. Employer prejudice occurs only in low-paying jobs.
Many economists believe that tax cuts increase incentives to work and invest but current U.S. tax levels do not appear to be on the downward side of the Laffer curve
a. True b. False Indicate whether the statement is true or false