Final answer:
True, an investor who receives $10,000 interest will pay higher taxes than one who receives $10,000 from eligible dividends, due to the different tax treatments of interest income and eligible dividends in the U.S.
Step-by-step explanation:
True, an investor who receives $10,000 interest will generally pay higher taxes than one receives $10,000 from eligible dividends. In the U.S., income tax is levied on the nominal interest without adjustment for inflation, meaning the entire $500 from a 5% interest on a $10,000 investment is taxable irrespective of whether inflation is 0%, 5%, or 10%. In contrast eligible dividends often come with tax advantages, such as favorable tax rates, and may not be taxed as heavily as regular interest income.