What are the tax and nontax factors in choosing between compensating employees by way of a pension plan versus a deferred compensation program?
Answer to relevant QuestionsSuppose a firm faces a current tax rate of 35% but expects this rate to fall to 20% in the future. Employees on average face a current marginal tax rate of 31% but expect this rate to fall to 20% when they retire in 15 ...Suppose taxpayers were given a new option under the tax law for retirement funding. The new option requires that they forego a current tax deduction for pension plan contributions. Any contribution would accumulate in the ...Do low tax rates in a foreign country imply that expected after-tax rates of return on marginal investments should be higher than those on domestic investments? Explain. Under what conditions will foreign tax credits result in a U.S. corporation paying exactly the same tax on foreign income as it would if this income were earned directly in the United States? Do all U.S. corporations have an incentive to reduce their foreign taxes paid? Why or why not?
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