04/20/2017 - Patricia Healy: Taxation Of Municipal Bonds In The U.S.? Heavily Indebted Governments Are Desperate For Revenue
“Tax-exempt municipal bonds play an important role in our building of infrastructure – we see the results every day in roads and bridges, airports, mass transit systems and affordable housing, hospitals and universities. Tax exemption results in lower interest expense for issuers, thus reducing property or other taxes and fees for residents .. Some lobbyists have suggested that everything is on the table, including taxation of municipal bonds .. The fear that municipal bond interest will be taxed has been one factor contributing to the muni–Treasury ratio’s being higher than average. Additionally, Treasury bonds may have lower yields than usual due to their attractiveness in a world of low-to-negative interest rates. They may also be benefiting from a flight to quality .. We do not think municipal bonds will lose their tax-exempt status .. If certain deductions are not allowed at the personal and corporate levels, municipal bonds will be one of the few tax breaks that remain. However, it is clear that the exemption is in play and that there are folks fighting hard for its continuation.”
