The daily newspaper about public finance, The Bond Buyer, this evening reported on the “American Jobs Act of 2011″ sent to Congress by President Obama. The article finds that the Obama proposal:
would bar wealthy investors from using tax-exempt bond interest and other tax exclusions, expenditures and deductions to reduce their income tax rates below 28% — a proposal that would have significant adverse impacts on the municipal bond market.
The restrictions would target a key buyer of tax-exempt municipal bonds — single taxpayers with incomes of $200,000 or greater, and married couples with incomes of $250,000 or greater. The proposal would apply to taxable years beginning on or after Jan. 1, 2013.
As a result…
“It would be dramatic for municipal bond demand,” said Matt Fabian, a managing director of Municipal Market Advisors. “It would mean higher income investors would pay less for municipal bonds and demand higher interest rates. Issuers’ borrowing costs would rise dramatically.”
Internal Revenue Service data from 2009 shows that 58% of all of the tax-exempt interest reported to the IRS was from individuals with incomes of $200,000 or higher, Fabian said.
You can read the full Bond Buyer article here.
The text of the “American Jobs Act of 2011” is available here.