Traditional tax incidence theory emphasizes that the burden of a specific factor tax is shared by other factors of production. For example, a tax imposed on labor will reduce the quantity of labor hired, increase the capital-to-labor ratio, and reduce interest rates. Thus, owners of capital will...

This paper uses annual data to examine the impact of federal budget deficits in the United States upon interest rates. The model is framed in a loanable funds model. The model allows for international capital flows, inflationary expectations, and other factors. The finding is that federal budget...