Suppose that congress passes an investment tax credit, which subsidizes domestic investment.?

Question

Suppose that congress passes an investment tax credit, which subsidizes domestic investment.
How does this policy affect national saving, doemstic investment, net capital outflow, the interest rate, the exchange rate, and the trade balance?

Answer 1

It would have to be offset to some degree with higher tax rates, which could further the tax advantages that investors have over wage earners. If it was done properly, it would be at a rate of around 20% where it is offsetting more income of the lower tax brackets and less income of the higher tax brackets.

It would encourage domestic investment and increase the savings rate. It would decrease foreign investments made by Americans. It would probably slightly strengthen the dollar. However foreign countries may react to this by decreasing their investments in the US by an amount that would offset any advantages of increased investment domestically.

Answer 2

Whats humorous is The Bush tax cuts, quite meant the oil agencies paid extra company tax's than they did with the Clinton tax plan. yet you do no longer see the democrats wanting to flow lower back to the clinton tax plan for oil agencies. 2. you observe, you do no longer see democrats wanting a providence salary tax against Apple computing gadget the two, now that they are making extra income than any oil business enterprise ever did.,