Question
Suppose that, in an effort to reduce the federal deficit, Congress increases the top personal tax rate on interest and dividends to 35% but retains
Suppose that, in an effort to reduce the federal deficit, Congress increases the top personal tax rate on interest and dividends to 35% but retains a 14% tax rate on realized capital gains. The corporate tax rate stays at 25%. Assume capital gains are 50% of equity income.
a. Compute the total corporate plus personal taxes paid on each $1 of debt income. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Total tax $
b. Compute the total corporate plus personal taxes paid on each $1 of equity income if all capital gains are realized immediately. (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Total tax $
c. Compute the total corporate plus personal taxes paid on each $1 of equity income if all capital gains are deferred forever. (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Total tax $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started