The Exclusion of Interest of State and Local Bonds from Taxation

question 1

Multiple Choice

The exclusion of interest of state and local bonds from taxation by the federal government:

• A)decreases interest costs for state and local governments.
• B)increases interest costs for state and local governments.
• C)benefits lower-income taxpayers more than upper-income taxpayers.
• D)discourages borrowing by local governments.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly followed accounting rules and standards for financial reporting.

Accounting and Financial Reporting

The process of recording, summarizing, and reporting the financial transactions of a business to provide an accurate picture of its financial position and performance.

Liability

Anything owed to creditors—the claims of a company’s creditors.

Creditors

Individuals or institutions to whom money is owed by a debtor or borrower.