A new tax law aimed at encouraging the reforestation of cleared land in order to increase the amount of forested land in a particular region offers lumber companies tax incentives for each unit of cleared land they reforest. One lumber company has accordingly reduced its tax liability by purchasing a large tract of cleared land in the region and reforesting it. The company paid for the purchase by clearing a larger tract of land in the region, a tract that it had planned to hold in long-term reserve. If the statements above are true, which one of the following must be true about the new tax law?
A: It can provide a motivation for companies to act in a manner contrary to the purpose of the law while taking advantage of the tax incentives.
B: It will have no immediate effect on the amount of forested land in the region.
C: It will ultimately cause lumber companies to plant trees on approximately as much land as they harvest in the region.
D: It will provide lumber companies with a tax incentive that will ultimately be responsible for a massive decrease in the number of mature forests in the region.
Choose A, B, C or D as your solution.
A