Which Households Own Municipal Bonds? Evidence From Tax Returns
AbstractThis paper uses data from 1988 federal income tax returns, which asked taxpayers to report their tax-exempt interest income as an information item, to analyze the distribution of tax-exempt asset holdings. More than three quarters of the tax-exempt debt held by households was held by those with marginal tax rates of 28% or more. The paper reports two measures of the average marginal tax rate on tax-exempt debt. The first measures the increase in taxes if a small fraction of each taxpayer's exempt interest income were converted to taxable interest. This weighted average of 'first-dollar" marginal tax rates was 25.8%. A second calculation finds that if all tax-exempt interest were reported as taxable interest, taxes would rise by 27.6% of the increase in taxable interest. Many taxpayers who have substantial tax-exempt interest receipts, but low first-dollar marginal tax rates, would be driven into higher tax brackets if the exemption were eliminated but their portfolios remained the same.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3900.
Date of creation: Nov 1991
Date of revision:
Publication status: published as National Tax Journal, Volume XLIV, No. 4, Part 1, pp. 93-103, (December 1991). Available through NBER.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Feenberg, D.R. & Poterba, J.M., 1991. "Which Households Own Municipal Bonds? Evidence from Tax Returns," Working papers 588, Massachusetts Institute of Technology (MIT), Department of Economics.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Auerbach, Alan J & King, Mervyn A, 1983.
"Taxation, Portfolio Choice, and Debt-Equity Ratios: A General Equilibrium Model,"
The Quarterly Journal of Economics,
MIT Press, vol. 98(4), pages 587-609, November.
- Alan J. Auerbach & Mervyn A. King, 1984. "Taxation, Portfolio Choice, and Debt-Equity Ratios: A General Equilibrium Model," NBER Working Papers 0546, National Bureau of Economic Research, Inc.
- James M. Poterba, 1989.
"Tax Reform and the Market For Tax-Exempt Debt,"
NBER Working Papers
2900, National Bureau of Economic Research, Inc.
- Barber, Brad M. & Odean, Terrance, 2004. "Are individual investors tax savvy? Evidence from retail and discount brokerage accounts," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 419-442, January.
- Andrea Mattozzi, 2010.
"Policy Uncertainty, Electoral Securities, And Redistribution,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 45-71, 02.
- Andrea Mattozzi, 2003. "Policy Uncertainty, Electoral Securities and Redistribution," Levine's Working Paper Archive 666156000000000260, David K. Levine.
- Mattozzi, Andrea., 2005. "Policy uncertainty, electoral securities and redistribution," Working Papers 1229, California Institute of Technology, Division of the Humanities and Social Sciences.
- Poterba, James M. & Verdugo, Arturo Ramírez, 2011. "Portfolio Substitution And The Revenue Cost Of The Federal Income Tax Exemption For State And Local Government Bonds," National Tax Journal, National Tax Association, vol. 64(2), pages 591-613, June.
- Eijffinger, S.C.W. & Huizinga, H.P. & Lemmen, J.J.G., 1998.
"Short-term and long-term government debt and non resident interest witholding taxes,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-76575, Tilburg University.
- Eijffinger, Sylvester C. W. & Huizinga, Harry P. & Lemmen, Jan J. G., 1998. "Short-term and long-term government debt and nonresident interest withholding taxes," Journal of Public Economics, Elsevier, vol. 68(3), pages 309-334, June.
- Harry P. Huizinga & Jan J.G. Lemmen & Sylvester C.W. Eijffinger, 1997. "Short-Term and Long-Term Government Debt and Nonresident Interest Withholding Taxes," FMG Discussion Papers dp275, Financial Markets Group.
- Eijffinger, S.C.W. & Huizinga, H.P. & Lemmen, J.J.G., 1996. "Short-Term and Long-Term Government Debt and Nonresident Interest Withholding Taxes," Discussion Paper 1996-88, Tilburg University, Center for Economic Research.
- Brooks, Robert, 1999. "Municipal bonds: a contingent claims perspective," Financial Services Review, Elsevier, vol. 8(2), pages 71-85.
- James M. Poterba, 2001. "Taxation and Portfolio Structure: Issues and Implications," NBER Working Papers 8223, National Bureau of Economic Research, Inc.
- Francis A. Longstaff, 2009. "Municipal Debt and Marginal Tax Rates: Is there a Tax Premium in Asset Prices?," NBER Working Papers 14687, National Bureau of Economic Research, Inc.
- James M. Poterba & Andrew Samwick, 1999.
"Taxation and Household Portfolio Composition: U.S. Evidence from the 1980s and 1990s,"
NBER Working Papers
7392, National Bureau of Economic Research, Inc.
- Poterba, James M. & Samwick, Andrew A., 2003. "Taxation and household portfolio composition: US evidence from the 1980s and 1990s," Journal of Public Economics, Elsevier, vol. 87(1), pages 5-38, January.
- James M. Poterba & Arturo Ramirez Verdugo, 2008. "Portfolio Substitution and the Revenue Cost of Exempting State and Local Government Interest Payments from Federal Income Tax," NBER Working Papers 14439, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.