This paper investigates which types of borrowers and lenders in the U.S. bond market gain (or lose) as result of the interaction of inflation with a nominal and discriminating tax structure. It is shown that an increase in the rate of inflation favors tax exempt institutions, and probably other lenders too. Corporate borrowers probably gain while mortage borrowers probably lose. The paper also investigates the one shot redistributive effects of indexing the tax structure. It is shown that the reform hurts tax exempt institutional investors and, probably, other lenders too. It hurts corporate borrowers and probably favors state and local governments and mortgage borrowers.