I would have never though Munis would face a tax hike… of course, I thought the home mortgage deduction was sacrosanct as well. There are fewer and fewer places for safe income.
But Munis and the home mortgage deduction both are on the block, subject to revision as Congress continues to make a royal hash out of the future for my young children. Muddle through, we will, but the muddling gets messier with every passing day.
Here’s a good article on the topic:
Muni Bond Tax Breaks On The Table In Cliff Talks:
By exempting municipal bond interest from federal taxes, the government creates an incentive for investors to buy them, which helps hold down the borrowing costs of the states, cities and other entities that issue them. Curbing the exemption would likely reduce demand for the bond
Investors are willing to accept lower yields for municipal bonds because their interest income is exempt from federal income taxes and from taxes in the state in which the bonds were issued. In some high-tax areas, such as California, the bonds are also exempt from local income taxes.s, pushing those borrowing costs higher.
Here’s the Source: