The tax benefits of the simplified method decrease as the cost of the residence increases and as the taxpayer's marginal tax rate
In response to the claim that the CRS study was flawed because it did not allow enough time for tax changes to have effects on behavior, specification (2) replaces the tax variables with two dummy variables: Tax Cut Dummy 4 Years takes on a value of 1 the year the top marginal tax rate
is cut and the three years that follow, while Tax Increase Dummy 4 Years takes on a value of 1 the year of an increase in the top marginal rate and the three years that follow.
In any event, they suggest that if most of these deductions and credits were eliminated, the existing system of a schedule of marginal tax rates
could be replaced with a single and relatively low tax rate.
Now consider the combined effect of both introducing a land tax and at the same time reducing the marginal tax rate
of the marginal investor to either 30% or 28%.
Since the individual income tax structure includes various types of income, deductions, exclusions, credits, and taxes which are not subject to the same treatment under tax laws, the marginal tax rate
is not always apparent.
Using that figure, the taxable income would be $2,519, resulting in a marginal tax rate
of 10 percent and an average tax rate of 2.
Admittedly, Graham did not derive his simulated tax rate exclusively for calculating step-up induced depreciation benefits, but for determining a proxy for the marginal tax rate
of a firm.
The amounts in column E of Table 1 are based on the excess of the maximum statutory tax rate over firms' marginal tax rate
derived from the computed effective tax rate and the amounts in column G are based on the excess of the maximum statutory tax rate over the computed NOL marginal tax rate
For example, in Manitoba, the marginal tax rate
on taxable income between $71,190 and $115,739 is 43.
From 1913 to 2002 the US marginal tax rate
ranged from 7% in 1913-1915 to 94.
Panel B shows the outcome when an investor's marginal tax rate
falls during retirement.
The higher the marginal tax rate
, the lower is the value of the income stream, and the cheaper is the price of current consumption.