Assuming an expected increase in tax rate, what is the preferred way of financing?

If tax rates are expected to increase then preferred way of financing would be debt financing not equity.......cost of debt is interest which is always allowable expense in tax which creates tax savings.....whereas cost of equity is distribution of profit after tax which means that higher tax would have been deducted before providing any benefit to the equity holders.....

in such situation, the preferred way of financing is from equity rather than debt.
that is equity financing.
In this case, your profit(or earning) and tax shield both move in up ward direction.