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Tax Reform, Interest Rates and Capital Allocation

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  • Patric H. Hendershott

Abstract

The impacts of four major tax reform proposals on the level of interest rates and the allocation of the American capital stock are derived. The four plans are Bradley-Gephardt, Kemp-Kasten, Treasury I and Treasury II. The allocation is among seven types of nonresidential capital, rental housing, and owner occupied housing held by households in five different income classes.The inflation-neutrality of the four plans as also deduced.

Suggested Citation

  • Patric H. Hendershott, 1985. "Tax Reform, Interest Rates and Capital Allocation," NBER Working Papers 1708, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1708
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    1. George M. CONSTANTINIDES & Jonathan E. INGERSOLL Jr., 2005. "Optimal Bond Trading With Personal Taxes," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 6, pages 165-206, World Scientific Publishing Co. Pte. Ltd..
    2. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
    3. Don Fullerton, 1985. "The Indexation of Interest, Depreciation, and Capital Gains: A Model ofInvestment Incentives," NBER Working Papers 1655, National Bureau of Economic Research, Inc.
    4. Titman, Sheridan D, 1982. "The Effects of Anticipated Inflation on Housing Market Equilibrium," Journal of Finance, American Finance Association, vol. 37(3), pages 827-842, June.
    5. Patric H. Hendershott & Joel Slemrod, 1982. "Taxes and the User Cost of Capital for Owner‐Occupied Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(4), pages 375-393, December.
    6. Bulow, Jeremy I & Summers, Lawrence H, 1984. "The Taxation of Risky Assets," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 20-39, February.
    7. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-544, September.
    8. Hendershott, Patric H, 1981. "The Decline in Aggregate Share Values: Taxation, Valuation Errors, Risk and Profitability," American Economic Review, American Economic Association, vol. 71(5), pages 909-922, December.
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    1. Patric H. Hendershott, 1985. "Tax reform and financial markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 29, pages 153-186.
    2. Fullerton, Don & Henderson, Yolanda Kodrzycki, 1989. "A Disaggregate Equilibrium Model of the Tax Distortions among Assets, Sectors, and Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 391-413, May.
    3. Joel Slemrod, 1985. "The Impact of Tax Reform on Households," NBER Working Papers 1765, National Bureau of Economic Research, Inc.

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