Taxable and Tax-Exempt Interest Rates: The Role of Personal and Corporate Tax Rates / Joe Peek, James A. Wilcox.

Format:

Book

Author/Creator:

Peek, Joe.

Contributor:

National Bureau of Economic Research.

Wilcox, James A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1544.

NBER working paper series no. w1544

Language:

English

Subjects (All):

Interest rates--United States.

Interest rates.

Taxation--Mathematical models.

Taxation.

Tax exemption.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Taxable and Tax-Exempt Interest Rates

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Cambridge, MA : National Bureau of Economic Research, 1985.

Summary:

This paper investigates empirically the effects of personal and corporate taxes on taxable interest rates and on the spread between taxable and tax-exempt rates. Two main sets of results emerge. First, we establish that the effective marginal investors in the Treasury bill market are households, as opposed to tax-exempt institutions or corporations. We find no evidence of corporate tax rate effects on Treasury bill yields. The study is then extended to an examination of the tax-exempt market. The results there contradict the hypothesis that commercial bank arbitrage generally ensures that the taxable-tax-exempt interest rate spread is determined by the corporate tax rate. Our estimates decisively reject the corporate in favor of the personal income tax rate as being the relevant tax rate of the marginal investor in this market as well.

Notes:

Print version record

1985.