In 2013, Congress approved legislation favored by the Obama administration to increase the income tax rate on high-income taxpayers from 35% to 39%.

Using supply and demand analysis, show what happens in the market for Treasury bonds and the market for Municipal bonds to explain how the increase in income tax rates for wealthy people to lower the interest rates on municipal bonds relative to the interest rate on Treasury bonds.

Answer rating: 100% (QA)

When the income tax rate on highincome taxpayers increases it reduces the aftertax return on investm... View the full answer