Which of the following statements regarding implicit taxes and clienteles is not true?
A)Market forces drive down the BTROR of tax-favored assets.
B)The reduced return of tax-favored assets is an implicit tax.
C)Investors whose tax rate exceeds that of the marginal investor can reap some benefit through the clientele effect.
D)Marginal investors will always benefit from the implicit tax on tax-favored investments.

Question

Quizplus · Accepted Answer

The statement "Marginal investors will always benefit from the implicit tax on tax-favored investments" is not true. While some investors whose tax rate exceeds that of the marginal investor can benefit from the implicit tax through the clientele effect, marginal investors may not benefit if the reduced return on tax-favored assets is significant enough to outweigh any tax savings. Ultimately, the impact of implicit taxes and clienteles on investment decisions will depend on individual investor preferences and tax circumstances.

Which of the Following Statements Regarding Implicit Taxes and Clienteles