Re: Proposed law may change muni bond taxes
I agree with TexasProud that this is anything but "earth shattering". The issue seems to be over state taxes only. Muni's would still be exempt from Federal taxes, which are much higher than rates in all 50 states. As TexasProud points out, states could keep their own tax exemption by exempting all muni bond income . . . whether or not they would do this depends on whether the tax revenue forgone as a result of exempting out of state interest would be greater than the increased financing costs if their own bonds were taxable. The end result could be that ALL muni bond interest is tax free regardless of whether you are a resident of the issuer.
In any event, the difference between having state interest taxable versus non-taxable in the most extreme case (NYC 10.498% marginal rate) seems to be worth about 55 basis points in bond yield . . . not great but also not exactly earth shattering.
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