Anyone own municipal bonds? (And even if you do not, this matters to you)

[Wrestleknownothing]

If you own tax-exempt municipal bonds you should be aware of a current situation that threatens their tax-exempt status.

As the Trump administration contemplates extending the 2017 tax cuts they are required to find ways to offset the resulting decrease in revenue. The "tax pay-fors" are a mix of policy repeals and tax cut repeals. The House  Committee on Ways and Means released a broad list (found here) of potential pay-for options. This is a comprehensive list that will be paired back over time. It currently contains over 200 options, but not all will happen.

Of note among the options is to repeal the tax-exempt status of municipal bonds, Build America Bonds (BABs), Private Activity Bonds (PABs), and "other non-municipal bonds".

If the interest is no longer tax-exempt the market will re-price these bonds significantly. Any holder of these bonds will face immediate unrealized losses. That is the short-term effect.

The long-term effect is that everyone will face higher local taxes. If your school district, park district, or local government needs to borrow money they will have to pay higher interest rates. And those increased borrowing cost will be passed on to you. Or projects will not get funded and you will wonder why your roads, bridges, schools, etc. are in such bad shape. The impact/importance of muni bonds is detailed here.

But, it is not too late to do something about it. If you want to send a letter to your Member of Congress, the Bond Dealer of America has provided a template that can be found here.

And contact info for your Member of Congress can be found here.

[Le duke]

Gotta fund those tax cuts for the rich somehow.


Sent from my iPhone using Tapatalk

[Tripnsweep]

I mean those billionaires who don't want to pay taxes had to buy their way into setting policy, and who better than a wannabe billionaire? 

[Wrestleknownothing]

36 minutes ago, Tripnsweep said:

I mean those billionaires who don't want to pay taxes had to buy their way into setting policy, and who better than a wannabe billionaire? 

I do not know what this means in the above context.

[Tripnsweep]

49 minutes ago, Wrestleknownothing said:

I do not know what this means in the above context.

Then you're too stupid to have an adult conversation. 

[WrestlingRasta]

7 minutes ago, Tripnsweep said:

Then you're too stupid to have an adult conversation. 

Are you okay? 

[Wrestleknownothing]

24 minutes ago, Tripnsweep said:

Then you're too stupid to have an adult conversation. 

I would ask a follow up question, but your response makes it painfully obvious that you do not know what you are talking about either.

[BuckyBadger]

This will never pass, who do you think are the main owners of muni bonds? People in the highest tax brackets who  want to minimize their taxes —> people who are more likely to have voted for Trump.

Just because the idea was floated doesn’t mean it’s likely.

[Wrestleknownothing]

1 hour ago, BuckyBadger said:

This will never pass, who do you think are the main owners of muni bonds? People in the highest tax brackets who  want to minimize their taxes —> people who are more likely to have voted for Trump.

Just because the idea was floated doesn’t mean it’s likely.

Except there is precedence.

In 2017 when the tax cut was originally passed one of the proposals to pay for the tax cut was to remove the tax-exemption for advance refunding of munis. At the time the industry also argued that would never happen.

It happened.

The industry was caught off guard then. Do not get caught off guard now.

[BuckyBadger]

40 minutes ago, Wrestleknownothing said:

Except there is precedence.

In 2017 when the tax cut was originally passed one of the proposals to pay for the tax cut was to remove the tax-exemption for advance refunding of munis. At the time the industry also argued that would never happen.

It happened.

The industry was caught off guard then. Do not get caught off guard now.

Good point.

Asfar as me getting caught off guard. Well, let’s just say my tax bracket doesn’t quite get me to the muni discussion.

Edited 17 hours ago by BuckyBadger

[Husker_Du]

9 hours ago, Wrestleknownothing said:

I would ask a follow up question, but your response makes it painfully obvious that you do not know what you are talking about either.

he never does. you're supposed to just ignore his posts. 

[billyhoyle]

It never made sense anyway that municipal bonds were tax free but treasuries are not. The result is treasuries became a less attractive investment, have to be issued at higher interest rates, and we end up adding more to the debt than we otherwise would have.  

And why shouldn't the top income bracket get to pay lower taxes? We just had an election on this exact issue, and it was pretty convincingly decided that we want the wealthy to have lower taxes and have a more fair burden paid for by the middle/lower class. Yeah, maybe you pay a bit more in taxes to send your kid to public school, but the rich are paying for private school tuition on top of having to pay taxes for other people to go to public school. They deserve some type of tax relief. 

Edited 15 hours ago by billyhoyle