Examines the New View of yield spreads between taxable and tax-exempt bonds, which argues that personal income taxes are irrelevant to the relationship between interest rates on tax-exempt and taxable bonds. Finds evidence that the implicit tax rate, adjusted for quality differences, is related...

A New View of tax exemp-tion rejects the Traditional View that tax exemption gives a capital cost subsidy measured by the difference between taxable and tax-exempt interest rates. This paper develops a decisive voter model in which the New View is a special case. It considers the effects of...