Sage Journals: Discover world-class research

Abstract

The amount of tax-exempt debt has dramatically grown in recent years, although this growth has slowed with the passage of the Tax Reform Act of 1986. At the same time, real rates of return on this debt have risen. These phenomena may be explained by the effects of the federal and state governments. This article discusses the state and local policy variables that influence the market for intergovernmental debt. Placing these variables in a model of supply and demand for tax-exempt debt and analyzing them for unintended consequences and feedback loops produces a more robust and accurate picture of this market. Policy conclusions are then drawn to indicate the appropriate role for state and local governments in the tax-exempt arena.

Get full access to this article

View all access options for this article.

References

Angoff, Jay . In " `Small Issue' Industrial Development Bonds." Hearings before the Subcommittee on Oversight of the Committee on Ways and Means, House of Representatives, 97th Congress, First Session, April 8, 9, 10, 1981, Serial 97-14: 224-234.

Arak, M. and K. Guentner . "The Market for Tax Exempt Issues: Why Are the Yields So High?" National Tax Journal, Vol. XXXVI, No. 2, (June 1983): 145-161.

Chapman, Jeffrey I. , William Fishman , and John J. Kirlin . "Analysis of California Public Debt," California Debt Advisory Commission, 1982.

Gramlich, Edward M. and Harvey Galper . "State and Local Fiscal Behavior and Federal Grant Policy," Brookings Papers on Economic Activity 1 (1973): 15-66.

Hanus, Jerome J. The Nationalization of State Government. Lexington, MA: Lexington Press, 1981.

Hendershott, Patric H. and Timothy Koch . An Empirical Analysis of the Market for Tax-Exempt Securities: Estimates and Forecasts. New York: University Graduate School of Business Administration, 1977.

Howard, S. Kenneth . "Federal Grants: Their Impact on State Budget Offices," State Government, 50 (Spring 1977): 96-101.

Kimball, Ralph C.

"Commercial Banks, Tax Avoidance, and the Market for State and Local Debt Since 1970,"

New England Economic Review (January/February 1977): 3-21.

Kraft, John L.

"Control of Tax-Exempt Financing: Is Local Policy Initiative Preempted?"

National Civic Review, Vol. 70, No. 9 (October 1981): 449-459.

10.

Legislative Analyst of California . The 1987-88 Budget: Perspectives and Issues. Sacramento: Legislative Analyst, 1987.

11.

Lovell, Catherine , et al. Federal and State Mandating on Local Governments: An Exploration of Issues and Impacts, A report to the National Science Foundation, 1979.

12.

Mussa, Michael L. and Roger C. Kormendi . The Taxation of Municipal Bonds. Washington: American Enterprise Institute, 1979.

13.

Office of Management and Budget . Special Analysis: Budget of the United States Government, 1988. Washington, DC: U.S. Government Printing Office, 1987.

14.

Pechman, Joseph A. and B. Okner . Who Bears the Tax Burden? Washington, DC: Brookings Institute, 1974.

15.

Peterson, John E. "Changing Fiscal Structure and Credit Quality: Large U.S. Cities," in Charles H. Levine and Irene Rubin (eds.), Fiscal Stress and Public Policy. Beverly Hills, CA: Sage Publications, 1979.

16.

Peterson, John E. The Rating Game. New York: Twentieth Century Fund, 1974.

17.

Rosenbloom, Richard H.

"A Review of the Municipal Bond Market"

Economic Review, Federal Reserve Bank of Richmond, Vol. 62, No. 2, (March/April 1976): 10-19.

18.

Rubinfeld, Daniel . "Credit Ratings and the Market for General Obligation Bonds" National Tax Journal, March, 1973, Vol. XXVI, No. 1: 17-28.

Tax-Exempt Debt: An Intergovernmental Perspective

Abstract

Get full access to this article

References