Marc Choate, Michael L. Hand & Fred Thompson (all of Willamette University, Atkinson Graduate School of Management) have posted The Influence of Income Tax Rates on the Market for Tax-Exempt Debt on SSRN.  Here is the abstract:

Based on the indirect arbitrage opportunities afforded citizens by tax-exempt debt issue, this article presents a model establishing equilibrium in the market for tax-exempt debt. The model yields two predictions. Increases in Federal income tax rates increase the spread between taxable and tax-exempt interest rates, but have no effect on the equilibrium quantity demanded and supplied of tax-exempt debt. The latter prediction contrasts with a conventional point of view that increases in tax rates increase demand and supply of tax-exempt debt. The model’s predictions are supported by empirical evidence.