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# Computing Tax Savings

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Suppose that Congress recently amended the tax law to provide for a maximum 12% rate on interest income from U.S. savings bonds. Compute the tax savings from this preferential rate for:

a. Ms. E., who has a 15% marginal rate on ordinary income and earned \$290 interest on her investment in U.S. savings bonds.

b. Mr. K., who has a 35% marginal rate on ordinary income and earned \$290 interest on his investment in U.S. savings bonds.

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The interest income on U.S. savings bonds is generally taxed as ordinary income. Thus, if Congress amended the law to tax the income at a maximum rate of 12 percent, the taxpayer would save the ...

#### Solution Summary

Suppose that Congress recently amended the tax law to provide for a maximum 12% rate on interest income from U.S. savings bonds. Compute the tax savings from this preferential rate for:

a. Ms. E., who has a 15% marginal rate on ordinary income and earned \$290 interest on her investment in U.S. savings bonds.

b. Mr. K., who has a 35% marginal rate on ordinary income and earned \$290 interest on his investment in U.S. savings bonds.