NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxable and Tax-Exempt Interest Rates: The Role of Personal and Corporate Tax Rates

Joe Peek, James A. Wilcox

NBER Working Paper No. 1544 (Also Reprint No. r0709)
Issued in 1985
NBER Program(s):   ME

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.

download in pdf format
   (296 K)

download in djvu format
   (216 K)

email paper

This paper is available as PDF (296 K) or DjVu (216 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1544

Published: Peek, Joe and James A. Wilcox. "Tax Rates and Interest Rates on Tax-Exempt Securities." New England Economic Review, (January/February 1986) pp. 29-41 .

Users who downloaded this paper also downloaded these:
Peek and Wilcox w1379 The Reaction of Reduced-Form Coefficients to Regime Changes: The Case of Interest Rates
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us