More on Municipal Bonds

Posted by: Ben Levisohn on August 21, 2009

On Aug. 19, I asked readers if they would buy state and local government debt if municipal bonds weren’t tax exempt. Many readers said they wouldn’t but two recommended an alternative: taxing the municipal bonds that benefit private businesses such as sports arenas.

The Congressional Budget Office looked at that proposal too (it’s option #38 of 66) and, according to the study, eliminating tax-exempt private-activity bonds would add $23 billion to federal government coffers between 2010 and 2019, or $3.2 billion more than eliminating the tax exemption on all munis.

But these projects aren’t all about football stadiums. They also include money for airports, docks, mass transit, universities and hospitals. With that in mind, what’s your take on this proposal?

Reader Comments

diligentdave

August 22, 2009 4:32 PM

Obama's administration is hell bent on nationalizing everything, either directly or indirectly.

Of course, taxing any municipal bonds will have unintended repurcussions (everyone will avoid them, sell them off, driving up the cost of doing them, and basically destroying them).

The Democrats war on wealth will accomplish their objective - to impoverish our nation quite completely.

Robet B. Goodsell

August 22, 2009 8:20 PM

Eliminating the tax-exempt status of municipal bonds would be a big mistake. For these bonds to be competitive in the marketplace, the government entities issuing these bonds would have to raise interest payments considerably, which would put extreme financial pressure on already strapped governments. Sports arena aside, most of these bond issues provide the means for communities to build needed infrastructure, without which society as a whole suffers.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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