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Taxation

Which of the following statements is most correct and explain why?

a. Indexing tax brackets reduces the extent of "bracket creep."
b. Bonds issued by a municipality such as the city of Miami would carry a lower interest rate than bonds with the same risk and maturity issued by a private corporation such as Florida Power & Light.
c. Our federal tax laws tend to encourage corporations to finance with debt rather than with equity securities.
d. Our federal tax laws encourage the managers of corporations with surplus cash to invest it in stocks rather than in bonds. However, other factors may offset tax considerations.
e. All of the above

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e. All of the above

a. Indexing tax brackets reduces the extent of "bracket creep."

Bracket creep is that as our income rises we go into the next higher bracket. If we index (say to inflation), then the bracket itself would also increase and so even with higher income we may not move into the next higher bracket

b. Bonds ...

Solution Summary

The solution explains a multiple choice question relating to taxation

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