Muni Bond Tax Exemptions Upheld by U.S. Supreme Court

[MichaelB]

Good news for muni investors

May 19 (Bloomberg) -- The U.S. Supreme Court ruled that dozens of states can continue to offer special tax breaks on securities issued within their borders, deciding not to disrupt the $2.6 trillion municipal bond market.

Bloomberg.com: Worldwide

 

[statsman]

Definitely good news for DW and me, as we had planned to invest a sizable chuck of our taxable account into CA tax-exempt bond funds.

 

[socca]

Thanks for the update. I heard that this issue was being pursued in the courts.

 

[brewer12345]

Ummm, you think this is good news? The alternative would have been that anyone in any state could buy a muni issued anywhere (even out of state) and still avoid being taxed by their home state on the interest. I'd love to be able to buy national muni funds rather than just NJ and escape NJ state taxes.

 

[nepo]

Ummm, you think this is good news? The alternative would have been that anyone in any state could buy a muni issued anywhere (even out of state) and still avoid being taxed by their home state on the interest. I'd love to be able to buy national muni funds rather than just NJ and escape NJ state taxes.

So this is good for NJ (using your example). If NJ is where you live, that good should benefit you as NJ wouldn't have to pay higher interest to attract buyers who would have fled their tax exempt bonds. That means NJ wouldn't have to tax you in some other way to compensate for their increased borrowing costs.

 

[brewer12345]

So this is good for NJ (using your example). If NJ is where you live, that good should benefit you as NJ wouldn't have to pay higher interest to attract buyers who would have fled their tax exempt bonds. That means NJ wouldn't have to tax you in some other way to compensate for their increased borrowing costs.

NJ isn't me. More interested in what benefits me than the state I live in. Callow, I know.

 

[MichaelB]

Ummm, you think this is good news?

Yes

The alternative would have been that anyone in any state could buy a muni issued anywhere (even out of state) and still avoid being taxed by their home state on the interest. I'd love to be able to buy national muni funds rather than just NJ and escape NJ state taxes.

So a major disruption in the states muni bond market would be fine as long as you benefited? Wouldn't the value of most state's bonds decline if they lose the additional tax benefit? That would represent a tremendous economic loss in the US.

Michael

 

[brewer12345]

So a major disruption in the states muni bond market would be fine as long as you benefited? Wouldn't the value of most state's bonds decline if they lose the additional tax benefit? That would represent a tremendous economic loss in the US.

Michael

Have you been under a rock for the last 12 months?

 

[MichaelB]

Have you been under a rock for the last 12 months?

No, in Florida. Similar, but not quite the same.

I thought the disruption in the muni markets was nationwide and not state specific - more the result of credit concerns and not taxation.

 

[brewer12345]

I thought the disruption in the muni markets was nationwide and not state specific - more the result of credit concerns and not taxation.

If the tax landscape changed, the market for all states' muni obligations would go through a transition. But it probably would be less painful than what happened in the last year.

 

[gindie]

The alternative would have been that anyone in any state could buy a muni issued anywhere (even out of state) and still avoid being taxed by their home state on the interest.

Actually another legally acceptable alternative would be that a state could choose to tax all munis (including their own).

 

[Spanky]

Actually another legally acceptable alternative would be that a state could choose to tax all munis (including their own).

No, thank you.