The relationship between government financial condition and expected tax rates reflected in municipal bond yields.: An article from: National Tax Journal [HTML] [Digital]

This digital document is an article from National Tax Journal, published by National Tax Association on March 1, 1997. The length of the article is 7223 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.From the author: Yields on long-term municipal bonds reflect both current and expected future tax rates. This paper derives expected changes in tax rates from yields on short-term and long-term municipal bonds and examines the relationship between expected changes in tax rates and the financial condition of the federal government between 1965 and 1994. My main empirical result is that a positive relationship exists between the expected tax rate and federal debt Inflation also positively affects the expected tax rate, suggesting that investors may expect tight fiscal policies when inflation is hi (more…)