Final answer:
The statement that capital gains may be taxed at favorable rates lower than an individual's marginal rate is true. Long-term capital gains enjoy lower tax rates in the U.S. to encourage investment and are taxed differently than ordinary income.
Step-by-step explanation:
Capital gains may indeed be taxed at favorable rates that are less than an individual's marginal tax rate. This statement is true. In the United States, capital gains, which are the profits from the sale of assets such as stocks or real estate, can benefit from lower tax rates if the assets were held for longer than a year before being sold. These are referred to as long-term capital gains and are taxed at reduced rates compared to short-term capital gains which are taxed at the same rate as ordinary income. The rationale behind this tax treatment is to encourage savings and investment, influencing economic growth by providing a tax incentive for investors to engage in longer-term investments.
The key takeaways for this subject include the understanding that marginal tax rates apply to an additional dollar of income, whereas the taxation of capital gains can be more favorable, especially for long-term investments, thus not necessarily aligning with the rate of the last dollar of regular income earned. The policy around capital gains taxation reflects an intent to stimulate investment activity which is thought to be beneficial to the overall economy.