Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds
This paper illustrates how different assumptions about household portfolio behavior influence estimates of the amount of individual income tax revenue that would be collected if the interest tax exemption for state and local government bonds was repealed or scaled back. Using data from the 2004 Surv...
| Main Authors: | , |
|---|---|
| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
National Tax Association-Tax Institute of America
2011
|
| Online Access: | http://hdl.handle.net/1721.1/61961 https://orcid.org/0000-0003-3532-0998 |
| _version_ | 1811096699996733440 |
|---|---|
| author | Poterba, James M. Ramírez Verdugo, Arturo |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Poterba, James M. Ramírez Verdugo, Arturo |
| author_sort | Poterba, James M. |
| collection | MIT |
| description | This paper illustrates how different assumptions about household portfolio behavior influence estimates of the amount of individual income tax revenue that would be collected if the interest tax exemption for state and local government bonds was repealed or scaled back. Using data from the 2004 Survey of Consumer Finances, we estimate that federal income tax revenues would rise by $14.0 billion if current bondholders purchased taxable bonds, $8.9 billion if corporate stock replaced tax-exempt bonds in household portfolios, and $8.2 billion if they distributed their tax-exempt bond holdings across their other portfolio assets in proportion to their current portfolio shares. |
| first_indexed | 2024-09-23T16:47:39Z |
| format | Article |
| id | mit-1721.1/61961 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T16:47:39Z |
| publishDate | 2011 |
| publisher | National Tax Association-Tax Institute of America |
| record_format | dspace |
| spelling | mit-1721.1/619612022-09-29T21:32:51Z Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds Poterba, James M. Ramírez Verdugo, Arturo Massachusetts Institute of Technology. Department of Economics Poterba, James M. Poterba, James M. This paper illustrates how different assumptions about household portfolio behavior influence estimates of the amount of individual income tax revenue that would be collected if the interest tax exemption for state and local government bonds was repealed or scaled back. Using data from the 2004 Survey of Consumer Finances, we estimate that federal income tax revenues would rise by $14.0 billion if current bondholders purchased taxable bonds, $8.9 billion if corporate stock replaced tax-exempt bonds in household portfolios, and $8.2 billion if they distributed their tax-exempt bond holdings across their other portfolio assets in proportion to their current portfolio shares. National Science Foundation (U.S.) 2011-03-25T15:05:32Z 2011-03-25T15:05:32Z 2011-06 Article http://purl.org/eprint/type/JournalArticle 0028-0283 http://hdl.handle.net/1721.1/61961 Ramírez Verdugo, Arturo and James M. Poterba. "Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds." National Tax Journal, 64, 591-613 (June 2011). https://orcid.org/0000-0003-3532-0998 en_US National Tax Journal Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf National Tax Association-Tax Institute of America MIT web domain |
| spellingShingle | Poterba, James M. Ramírez Verdugo, Arturo Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title | Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title_full | Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title_fullStr | Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title_full_unstemmed | Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title_short | Portfolio Substitution and the Revenue Cost of the Federal Income Tax Exemption for State and Local Government Bonds |
| title_sort | portfolio substitution and the revenue cost of the federal income tax exemption for state and local government bonds |
| url | http://hdl.handle.net/1721.1/61961 https://orcid.org/0000-0003-3532-0998 |
| work_keys_str_mv | AT poterbajamesm portfoliosubstitutionandtherevenuecostofthefederalincometaxexemptionforstateandlocalgovernmentbonds AT ramirezverdugoarturo portfoliosubstitutionandtherevenuecostofthefederalincometaxexemptionforstateandlocalgovernmentbonds |