Municipal Bond Forum
Proposals probably have no impact on muni prices
Q
Do you think current muni prices have been effected by proposals out there that would abolish the tax exemption for municipal bonds or apply a 28% cap on the exemption?
A
James A. Klotz responds:
Although it is difficult to know for sure, our feeling is that there is little or no impact on current prices from the threat to tax exemption.
Here’s why.
As we said, we don’t think it’s likely, but if the exemption was capped at 28%, munis would still remain the most viable option for higher-tax bracket fixed-income investors.
In the remote possibility that the tax exemption was completely eliminated, few believe the Constitution would allow it to be enacted retroactively.
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