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Ms. V resides in a jurisdiction with a 35 percent income tax. Ms. V has $40,000 that she could invest in bonds paying 8 percent

Ms. V resides in a jurisdiction with a 35 percent income tax. Ms. V has $40,000 that she could invest in bonds paying 8 percent annual interest. She is also considering spending the $40,000 on a new luxury automobile. Ms V. is having a hard time deciding between these two alternatives. Why might it be easier if the jurisdiction increases its income tax rate to 50 percent?

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