Exclusion of municipal bond interest from income taxation

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Reference no: EM13796401

a. Construct a numerical example to show that the exclusion of municipal bond interest from income taxation is equivalent to a government subsidy of state and local capital spending.

b. Explain why it costs the government (taxpayers) more to subsidize this activity through the exclusion of municipal bond interest than it would be to simply give the subsidy directly.

Reference no: EM13796401

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