Tax Reform and Financial Markets

Patric H. Hendershott

NBER Working Paper No. 1707
Issued in September 1985
NBER Program(s):   ME   PE

Four tax reform proposals have been advanced in recent years: Bradley-Gephardt, Kemp-Kasten, Treasury-Department and the Administration plan. These plans could have significant impacts on financial markets. Reductions ininvestment incentives and marginal tax rates would tend to lower before-tax interest rates, and lower taxes on existing corporate capital would tend to increase stock prices. The pattern of security issues would be altered by resulting changes in the composition of investment between real estate and nonreal estate assets and in desired loan-to-value ratios. The paper compares and contrasts the likely impacts of each of the four reform proposals on interest rate (taxable and tax-exempt), security flows, and stock prices.

(413 K)

(257 K)

Published:

• Patric H. Hendershott, 1985. "Tax reform and financial markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 153-186. ,
• Hendershott, Patric H., "Tax Reform and Financial Markets," Economic Consequences of Tax Reform, Federal Reserve Bank of Boston, 1986.

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