What is a Break-Even Tax Rate?
The break-even tax rate has to do with the level of tax that would be incurred as part of a financial arrangement that would neither motivate participation nor discourage it. A break-even tax rate tends to leave the investor somewhat indifferent. This creates a situation where the investor has to be enticed to participate in the transaction by some other means, rather than relying on tax breaks to seal the deal. In one sense, a break-even tax rate does possess a limited degree of interest to an investor. Since the tax rate associated with the proposed arrangement will not tend to be a figure that the investor would consider prohibitive, the matter of incurring taxes associated with the opportunity is quickly set aside. This will provide the broker or dealer the chance to focus the attention of the investor on the other aspects of the transaction or series of transactions, pointing out the other merits of the arrangement. A break-even tax rate may also serve the purpose of an investor w
