Any Tax Whose Burden Depends on the Outcome of an Economic

question 45

True/False

Any tax whose burden depends on the outcome of an economic decision can be expected to create an economic distortion.

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Definitions:

Personal Tax Rate

The percentage at which an individual's income is taxed by the government.

Limited Liability

A legal structure that limits the financial liability of company owners to the amount they have invested in the company.

Debt Instrument

A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract.

Bond

A fixed income investment in which an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period at a variable or fixed interest rate.