I provide a new approach to measuring interest savings associated with issuing tax-exempt municipal bonds (munis) and present empirical evidence offering a solution to the long-standing “muni puzzle.” I show that the tax policy is effective and consistent with theory once I account for idiosyncratic issuer risk and investor preferences. I match tax-exempt munis to near-identical taxable munis issued by the same government at the same time with the same security characteristics to identify the slope of and the trend in implied marginal tax rates. Results of the random coefficients model, which mitigates issuer- and issuance-level unobserved effects, predict the slope of the marginal tax rate to be consistent with asset pricing theory and the tax profile of the typical muni investor. Findings also imply cyclicality over time and heterogeneity in implied marginal tax rates across issuers due to variations in idiosyncratic risk.

中文翻译：

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解决市政难题：谁从政府债务的免税中受益？

我提供了一种衡量与发行免税市政债券 (munis) 相关的利息节省的新方法，并提供了为长期存在的“市政难题”提供解决方案的经验证据。我表明，一旦我考虑了特殊的发行人风险和投资者偏好，税收政策是有效的并且与理论一致。我将免税市政债券与同一政府同时发行的具有相同安全特征的几乎相同的应税市政债券进行匹配，以确定隐含边际税率的斜率和趋势。随机系数模型的结果减轻了发行人和发行层面未观察到的影响，预测边际税率的斜率与资产定价理论和典型市政投资者的税收状况一致。