There are several Tax Credits and Deductions that reduce Tax Liability (the amount of tax you owe the government), including the Earned Income Tax Credit meant to assist those with lower earned incomes; credits for Health Care (Net Premium Tax Credit), and Education Credits such as the American Opportunity Credit or Lifetime Learning Credit to make health care and education more affordable. If you own a home, you may have also been able to deduct your Mortgage Interest from your taxable income, lowering your tax liability. Businesses also benefit from various tax credits and deductions. One is the depreciation deduction. For example, if ABC Construction buys a Caterpillar D10 bulldozer for $1,000,000, making it a depreciable asset, the IRS will allow ABC, Inc. to depreciate its value for 5 years. ABC, Inc. can deduct $200,000 annually from its taxable income for five years, effectively paying no income tax on $1,000,000 in income over five years. If ABC's average tax rate is 30%, it saves $300,000 in taxes over five years! Remember the Law of Demand and the relationship between Price and Demand. Consider how this tax deduction affects the cost and thus the demand for depreciable assets and how this affects the economy. Think about why the government allows these credits and deductions considering the Law of Demand. What are Federal income and Corporate income tax revenues used for by the government? Explain why the government seems to support lowering individual income ta