Suppose the expected inflation rate is 4 percent this year and the nominal interest rate is 8 percent. Assuming that a taxpayer is subject to a 28 percent MTR, show how an increase in the rate of inflation next year to 8 percent while the nominal interest rate rises to 10 percent affects taxation of nominal interest. How does inflation affect taxation of capital gains?
Answer to relevant QuestionsSuppose perfect competition prevails in the market for hotel rooms. The current market equilibrium price of a standard hotel room is $100 per night. Show that the current market equilibrium is efficient, assuming that both ...A single worker has gross income subject to tax of $40,000. She makes a $5,000 contribution to a special tax-deferred retirement plan offered by her employer. The worker claims one personal exemption for herself and has the ...Suppose the corporate profits are subject to a 34 percent MTR but the profits of noncorporate investment are not taxed. The gross return to corporate investment is 10 percent. Calculate the net return to corporate and ...Suppose the current corporate income tax in the United States is replaced with a general equal-yield consumption-type VAT. What would the impact of such a tax reform be for labor markets and capital markets? What is the ...All voters in a city pay an equal marginal tax rate of $10 per mile of roads paved per year. The federal government has a matching grant program of road paving whereby 75 percent of the cost of road paving is paid. Show how ...
Post your question