Jousting with rent seekers: Bruce Davie and tax-exempt bonds

Bruce Davie was the authority on the economics of state and local bonds whose interest income is excluded from federal income taxation (by section 103 of the Internal Revenue Code). Beginning with his dissertation in 1963 and continuing to his untimely death in 2003, he accumulated vast knowledge about tax-exempt bonds. That knowledge was put to excellent use during his time at the House Ways and Means Committee from 1979 through the late 1980s. He played the critical role in writing sections 141 through 150 of the Code, the sections that determine what state and local issuers are permitted to do by section 103. His efforts focused on minimizing the federal subsidy's economic distortions and maximizing its social benefits.