Suppose that Congress sets the top personal tax rate on interest and dividends at 39% and the top rate on realized capital gains at 18%. The corporate tax rate stays at 24%. Assume capital gains are half of equity income.
a. Compute the difference between the total corporate plus personal taxes paid on debt and the total taxes on equity income if all capital gains are realized immediately. (Do not round intermediate calculations, Round your answer to 4 decimal places.) Difference
b. Compute the difference between the total corporate plus personal taxes paid on debt and the total taxes on equity income if all capital gains are deferred forever (Do not round intermediate calculations. Round your answer to 4 decimal places.)
