Assume you face a progressive tax rate system show that it


Question: Assume you face a progressive tax rate system. Show that it does not pay for you to reduce your explicit tax rate on fully taxable income to below the implicit tax rate on tax-exempt securities. Under what conditions would you choose not to engage in clientele-based arbitrage when your marginal tax rate exceeds the implicit tax rate on tax-exempt securities, even absent restrictions on the deductibility of interest on loans?

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Management Theories: Assume you face a progressive tax rate system show that it
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