Municipal Bond Forum
State of munis if corporate tax rates were cut
Q
If corporate tax rates were reduced to, say, 25%, do you think the municipal bond market would be OK in terms of demand?
A
James A. Klotz responds:
An “A” rated corporate bond today will yield approximately 4.50% to 4.75%. This would equate to an after-tax return of 3.375% to 3.56% for an investor in the 25% tax bracket.
Municipal bond rates would compare favorably to these after-tax returns of corporate bonds.
Additionally, munis do not create taxable income that can push an investor into a higher bracket.
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