A proposed increase in the federal income tax rates may actually be viewed favorably by many mayors of cities because:

Question

Quizplus · Accepted Answer

An increase in federal income tax rates typically results in an increase in demand for tax-exempt municipal bonds. This increased demand causes prices of these bonds to increase and yields to decrease, which is beneficial for city governments that issue municipal bonds. This allows them to borrow money at a lower cost, which can help fund various projects and initiatives within the city. Option A is incorrect as it assumes that mayors want to raise their own taxes, which is not necessarily true. Option B is incorrect because an increase in federal income tax rates would cause the yields on municipal bonds to decrease, not increase. Option C is irrelevant to the question at hand.

A Proposed Increase in the Federal Income Tax Rates May