8 . The excess burden of the corporate income tax stems from a misallocation of investment between the corporate and noncorporate sectors when the supply of savings is perfectly inelastic .
9 . When the supply of savings is not perfectly inelastic , the corporate income tax can be shifted to workers .
10 . In the long run the corporate income tax has no effect on the price of products produced by corporations .
11 . The corporate income tax in the United States is levied on the sum of economic and normal profits .
12 . The corporate income tax is levied only on retained earnings with dividends paid out exempt from taxation .
13 . Because the corporate income tax base includes dividends , those dividends are taxed twice if they are also included in the personal income tax base .
14 . Because the opportunity cost of a corporate equity is not tax deductible , the corporate income tax encourages borrowing , which allows interest cost to be deducted from corporate income .
15 . If the corporate income tax is not shifted in the short run , then in the long run it will reduce the return to capital in the corporate sector only .
16 . Depreciation is based on historic cost . 17 . During periods of inflation historic cost overstates replacement cost . 18 . Corporate dividends are paid from post-tax income . Multiple Choice Questions 1 . The tax base for the corporate income tax in the United States is : a . the sum of normal and economic profits of corporations . b . economic profits of corporations . c . normal profits of corporations . d . retained earnings of corporations . 2 . Accelerated depreciation allows corporations to :