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The problem is a false statement, pre-tax rate of return on municipal bonds is an example of an explicit tax.
What is explicit tax?
The impact of taxes on an asset's price is known as an implicit tax. For instance, the price will increase to reflect the tax preference if an asset is tax-preferred. To avoid errors, one must explicitly consider implicit taxes.
Investors must pay the implicit taxes as a cost for preferred (explicit) tax treatment. Tax preferences are the variations between an investment's taxable income and financial accounting income before taxes. Tax preferences are referred to as a whole as tax subsidies.
The reduced pre-tax rate of return on municipal bonds is an example of an explicit tax. True or false
Therefore,
The reduced pre-tax rate of return on municipal bonds is an example of an explicit tax.
The problem is a false statement.
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