Use the table for the question(s)below.
Consider the following historical top federal tax rates in the United States:
Personal Tax Rates
-In 2005,assuming an average dividend payout ratio of 50%,the effective tax rate for equity holders was closest to:

Question

Use the table for the question(s)below.
Consider the following historical top federal tax rates in the United States:
Personal Tax Rates 
-In 2005,assuming an average dividend payout ratio of 50%,the effective tax rate for equity holders was closest to:

Quizplus · Accepted Answer

Based on the table, the top marginal tax rate for individuals in 2005 was 35%. However, assuming an average dividend payout ratio of 50%, the effective tax rate for equity holders would be the individual tax rate multiplied by (1 - the dividend tax rate). In 2005, the dividend tax rate was 15%, resulting in an effective tax rate of 0.35 * (1 - 0.15) = 0.2975 or 29.75%. Rounded to the closest option, the closest answer is C) 45%.

Use the Table for the Question(s)below