Research article Special Issues

The impact of federal income tax rate cuts on the municipal bond market in the U.S.: A brief exploratory empirical note

  • Received: 12 December 2017 Accepted: 10 April 2018 Published: 07 June 2018
  • JEL Codes: G41, G12

  • Using annualized data for the 1974–2015 period, this study adopts a loanable funds approach to investigate empirically the impact of U.S. federal government fiscal policy of income tax rate cuts on the ex ante real interest rate yield on high grade municipal bonds. Empirical appears to show that the ex ante real interest rate yield on high grade tax free municipal bonds is a decreasing function of the maximum marginal federal personal income tax. Based upon this very preliminary, exploratory study, it follows that reducing federal income tax rates may act to raise the cost of borrowing to cities, counties, and states across the U.S.

    Citation: Richard J. Cebula, Don Capener. The impact of federal income tax rate cuts on the municipal bond market in the U.S.: A brief exploratory empirical note[J]. Quantitative Finance and Economics, 2018, 2(2): 407-412. doi: 10.3934/QFE.2018.2.407

    Related Papers:

  • Using annualized data for the 1974–2015 period, this study adopts a loanable funds approach to investigate empirically the impact of U.S. federal government fiscal policy of income tax rate cuts on the ex ante real interest rate yield on high grade municipal bonds. Empirical appears to show that the ex ante real interest rate yield on high grade tax free municipal bonds is a decreasing function of the maximum marginal federal personal income tax. Based upon this very preliminary, exploratory study, it follows that reducing federal income tax rates may act to raise the cost of borrowing to cities, counties, and states across the U.S.


    加载中
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    [8] Madura J (2008) Financial markets and institutions, 8th ed. Mason, OH: Thomson Higher Learning.
    [9] Neusser K (2016) Time series econometrics. Switzerland: Springer.
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    [11] Poterba JM, Rueben KS (1999) Municipal bond yields: Whose tax rates matter? Natl Tax J 41: 219–233.
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  • © 2018 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0)
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