Federal Taxation and the Supply of State Debt

Gilbert Metcalf

No 3255, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a model of debt finance at the sub-national level from which municipal bond supply equations are derived. Federal tax considerations are shown to be important determinants of the price entering the bond supply equation. Using data on 40 state governments over a seven year period in the 1980s, I show that federal tax rates have an important effect on the supply of municipal bonds - independent of the demand side effect that is usually considered in the literature. Furthermore, the effect persists after controlling for capital expenditures, thereby suggesting that municipal bond proceeds are fungible at the margin. This has implications for the measurement of the tax expenditure associated with tax exempt debt.

Date: 1990-02
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Journal of Public Economics, Volume 51, pp. 269-285, (1993)

Downloads: (external link)
http://www.nber.org/papers/w3255.pdf (application/pdf)

Related works:
Journal Article: Federal taxation and the supply of state debt (1993)
Working Paper: FEDERAL TAXATION AND THE SUPPLY OF STATE DEBT (1989)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3255

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3255

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).