A reduction in the tax liability of businesses or individuals is achieved through government incentives designed to stimulate capital investment. For example, a company investing in new manufacturing equipment might see a direct decrease in its owed taxes, freeing up capital for further investments or other business needs.
Such incentives encourage economic growth by making investments more financially attractive. Historically, these credits have been used to promote specific industries or address economic downturns, boosting employment and fostering technological advancements. The resulting increase in business activity can lead to a broader positive impact on the economy.
