Working Paper: NBER ID: w1707
Authors: Patric H. Hendershott
Abstract: 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.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax reforms (H29) | before-tax interest rates (E43) |
| Lower investment incentives and marginal tax rates (H32) | before-tax interest rates (E43) |
| Lower taxes on existing corporate capital (G31) | stock prices (G12) |
| Tax reforms (H29) | stock prices (G12) |
| Tax reforms (H29) | security issues (F52) |
| Tax reforms (H29) | demand for different types of securities (G12) |