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Tax reform and financial markets

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  • 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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Suggested Citation

  • Patric H. Hendershott, 1985. "Tax reform and financial markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 29, pages 153-186.
    • Handle: RePEc:fip:fedbcp:y:1985:p:153-186:n:29
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    File URL: http://www.bostonfed.org/economic/conf/conf29/conf29e.pdf
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    References listed on IDEAS

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    1. Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 153-185, National Bureau of Economic Research, Inc.
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    10. Patric H. Hendershott & James D. Shilling, 1981. "The Impacts on Capital Allocation of Some Aspects of the Economic Recovery Tax Act of 1981," NBER Working Papers 0825, National Bureau of Economic Research, Inc.
    11. Patric H. Hendershott & James D. Shilling, 1982. "Capital Allocation and the Economic Recovery Tax Act of 1981," Public Finance Review, , vol. 10(2), pages 242-273, April.
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    Cited by:

    1. Thomas Downs & Patric H. Hendershott, 1986. "Tax Policy and Stock Prices," NBER Working Papers 2094, National Bureau of Economic Research, Inc.
    2. Patric H. Hendershott & David C. Ling, 1985. "The Administration Tax Reform Proposal and Housing," NBER Working Papers 1740, National Bureau of Economic Research, Inc.

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