The difference between the capital gains tax rate and the income tax rate is an incentive for
A) firms never to split their stock.
B) firms to declare more stock dividends.
C) firms to pay more earnings as dividends.
D) firms to retain more earnings.

Question

Quizplus · Accepted Answer

Retaining more earnings can lead to an increase in stock value, which is taxed at the capital gains rate, often lower than the income tax rate on dividends.

The Difference Between the Capital Gains Tax Rate and the Income