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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.

Suggested Citation

  • Patric H. Hendershott, 1985. "Tax Reform and Financial Markets," NBER Working Papers 1707, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1707
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    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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