Suppose that Congress sets the top personal tax rate on interest and dividends at 35% and the

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Suppose that Congress sets the top personal tax rate on interest and dividends at 35% and the top rate on realized capital gains at 15%. The corporate tax rate stays at 35%. Compute the difference between the total corporate plus personal taxes paid on debt and the total taxes on equity income if
(a) All capital gains are realized immediately
(b) Capital gains are deferred forever. Assume capital gains are half of equity income.
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Principles of Corporate Finance

ISBN: 978-1259144387

12th edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen

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