When you spend money on your children’s consumption, this transfer is not taxed, but if you make a large direct gift to your children, it is taxed. Why does this represent a horizontal inequity inherent in transfer taxes? Can you think of any policy modifications that could reduce this inequity?
Answer to relevant QuestionsSenator Crawford, arguing in favor of capital gains tax cuts, says that reducing capital gains tax rates will stimulate entrepreneurial activity. Senator Long, arguing against these tax cuts, suggests that they will ...A researcher found that when the capital gains tax rate declined, the average bequest size fell as well. How does the tax treatment of capital gains in the United States explain this relationship? Suppose that dividend yield is 6%, depreciation is 12%, and the corporate tax rate is 35%. What would be the marginal cost of each dollar of machinery investment under the following situations? a. Firms are allowed to ...Different states have different corporate tax rates. How could you use this to study the elasticity of corporate investment with respect to corporate tax rates? What would be the problems with this approach? Imagine that a $30,000 investment in a good is expected to return you $25,000, and your marginal tax rate is 30%. The government is considering an investment tax credit that reduces the price of the investment. How large ...
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