I:18-33 Implicit Tax Rates and Clientele Effects. Consider three taxpayers who are in the following tax brackets:
Question:
I:18-33 Implicit Tax Rates and Clientele Effects. Consider three taxpayers who are in the following tax brackets:
Alice 25%
Brad 35%
Camille 40%
The BTROR on a benchmark investment is 10% (i.e., Rb = 10%). Compute the equilibrium BTROR and the implicit tax rate on a tax-exempt bond under each of the following three alternative assumptions.
a. Alice is the marginal investor.
b. Brad is the marginal investor.
c. Camille is the marginal investor.
d. Which taxpayer (Alice, Brad, or Camille) would Camille like to see be the marginal investor? Why?
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