Which of the following would be the effect of indexing the tax system to take into account the effects of inflation on taxing capital gains?
A)Only real interest earnings would be taxed.
B)Taxing capital gains would become irrelevant.
C)Average tax rates would increase.
D)Investors would be worse off.

Question

Quizplus · Accepted Answer

Indexing the tax system to take into account the effects of inflation on taxing capital gains would mean that only real interest earnings would be taxed. This would ensure that investors are not taxed on gains that simply reflect inflation, but rather only on the real gains they have made.

Which of the Following Would Be the Effect of Indexing