Indirect and Direct Subsidies for Cost of Government Capital: Comparing Tax-Exempt Bonds and Build America Bonds
School of Public Administration, Uni. of New Mexico
Dwight V. Denison
University of Kentucky - Martin School of Public Policy and Administration
February 19, 2011
This study compares the direct and indirect interest subsidies through the yields on traditional tax-exempt bonds and Build America Bonds (BABs). Using a sample of the California primary market, we find that on average BAB has an interest rate of approximately 72 basis points (bps) lower than tax exempt bond and the implied tax rate for the marginal investor is 25 percent.
Number of Pages in PDF File: 29
Keywords: Municipal Bond, Build America Bonds, ARRA2009, Interest Cost, Implicit Tax Rate
JEL Classification: G28, H74, G12working papers series
Date posted: February 21, 2011
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