Advanced Search
MyIDEAS: Login to save this paper or follow this series

Davis v. Department of Revenue of Kentucky: A Preliminary Impact Assessment

Contents:

Author Info

  • Dwight Denison

    ()
    (Martin School of Public Policy and Administration, University of Kentucky)

  • Merl Hackbart

    (Martin School of Public Policy and Administration, University of Kentucky)

  • Michael Moody

    (Department of Public Administration, University of Kansas)

Registered author(s):

    Abstract

    States with income taxes frequently exempt municipal bond interest from state taxation. Such exemptions, referred to as double exempts, are tax expenditures that reduce state revenues, but are viewed as a subsidy to the cost of capital for the state and its localities. All but a few states provide the income tax exemption for state based issues while taxing interest from municipal bonds issued by muni issuers in other states. A recent court case, Davis vs. Department of Revenue of Kentucky, declared state statutes limiting the state income tax exemptions to ”in-state” issues unconstitutional. This paper provides some legal background and context for the current case and addresses two key fiscal implications of this case. First, the paper presents a basic model that suggests that bonds issued by states with higher marginal tax rates would see the yields increase on their obligations while states with lower than average marginal tax rates would see their yields decline. The yields would converge at new market equilibrium due to the elimination of tax preferences across the states. Second, the preliminary estimates suggest a good deal of variance in how much tax revenue each state will lose if the case is upheld by the Supreme Court.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ifigr.org/publication/ifir_working_papers/IFIR-WP-2007-03.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by University of Kentucky, Institute for Federalism and Intergovernmental Relations in its series Working Papers with number 2007-03.

    as in new window
    Length: 22 pages
    Date of creation: Apr 2007
    Date of revision:
    Handle: RePEc:ifr:wpaper:2007-03

    Contact details of provider:
    Postal: Lexington, KY 40506-0027
    Phone: (859) 257-5741
    Fax: (859) 323-1937
    Web page: http://www.ifigr.org/
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ifr:wpaper:2007-03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David E. Wildasin).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.