Posted on 09/13/2011 7:22:44 AM PDT by maggief
Municipal bonds have always been synonymous with tax-free income. That would end if President Obama gets his way.
Under the jobs bill the President sent to Congress Monday, high-income individuals and families would no longer receive interest from state and municipal bonds free completely from federal income taxes, beginning in 2013. The legislation would also reduce the value of tax deductions for taxpayers in the highest bracket.
Specifically, individuals earning over $200,000 and families earning over $250,000 would effectively have the value of tax breaks against the top 35% bracket lowered to the 28% bracket.
(Excerpt) Read more at online.barrons.com ...
OMG. We have got to show this guy the door. He’s gonna kill all reasons to save.
But, I gotta hand it to Mr. Obama, he’s the most talented socialist I’ve ever encountered.
Ugh.
I guess he doesn’t want municipalities to fund projects like schools, fire departments, hospitals. It will be kind of hard to fund projects when investors have no incentive to invest.
Epic dunce and moron.
"One of the ironies of this proposal in the so-called jobs bill is that the measure contains infrastructure spending, some $38 billion worth. It would also create an infrastructure bank to fund such projects.
But reducing demand for bonds issued by state and regional authorities that build highways, bridges, airports, water and sewer systems and transportation projections would hamper the very sort of projects the legislation seeks to encourage."
Obamunism in a nutshell.
Bingo! If states and cities are less dependent on themsleves, they will be more dependent upon the federal government. That’s the plan.
I’ve said it before and I’ll say it again:Obama and the Democrats are doing everything that they can to hold back, control, hamper, regulate and take from businesses and those who start, own and run them. They are doing everything possible to destroy the economy. Then they scream JOBS, JOBS, JOBS.
This proposal shows how UNserious Zero is. It’s unconstitutional on its face, AND would dramatically raise the cost of borrowing for the Democrat localities he so cherishes. It won’t pass, and he doesn’t want it to pass.
He’s a lunatic
The words in parentheses were not in the original headline, and they are incorrect. The income from municipal bonds does not create "tax deductions," but, rather, is free from federal tax.
For example, if you have $100,000 in taxable income from your job, and receive $10,000 in interest from munis, you would pay taxes on the $100,000, but not on the $10,000. If, on the other hand, the interest was from corporate bonds, you would owe taxes on the entire $110,000.
My mistake.
Should be phrased “limits on taxable income exclusions” if space permitted. You are free to ping the mods.
It makes the cities and states more dependent of federal dollars. According to plan.
Obama is anti-senior citizen.
1. Obama claims there is zero inflation so senior citizens do not get a COLA increase in their social security check.
2. Obama has reduced the interest rate on CD’s to nearly zero.
3. Now Obama wants to take away the last source of income for senior citizens by taxing them on their municipal bond interest.
Is AARP going to their members?????
Why would you assume that local pols are borrowing responsibly? I haven’t seen any evidence of that - and there isn’t any. It is hilarious that Obamalini wants to cut-off the local turkeys from pursuing their boondoogles. That will make them want to get their machines in gear for him next November ;-)
Do not even give him that credit. He reads what “others” want him to.
This would be a terrible move but would almost certainly apply to new issues and not existing bonds. Existing bonds could actually go up in value due to their scarcity value. Bond prospectuses open issuers to legal liability from a revocation and there are other issues such as states wanting to tax interest on treasury issues
You sure can’t put money in a savings account these days because a checking account makes more interest than a savings accounts, CD or Money Market because it is like a big whopping .75 - 1.25%. I remember when bank interest income was above 5%.
So, now let’s kill the munis too! BIG DEMOCRAT supporters are going to be PO’D to say the least! I’m emailing this story to a few of them right now!
I assume municipal bond rates would go up. I many localities, municipal bonds are sold and ‘special benefit districts’ are created to pay for roads and sewer, in new housing developments...repaid by homeowners as special assessments. If he pushes the rates up, goodbye housing market.
This same kind of nonsense has been tried before, as recent as the 20’s. The results were pure disaster as the big money guys just shifted their wealth out of the country to more lucrative climates. Now with the advances in electronic banking this can be done in a nanosecond. Only the middle classes are hurt by this as they do not have the resources to compete. Jobs of course go along with the wealth.
Obama needs to be the guy in the Allstate “mayhem” commercials. Everything he proposes wrecks, steals from, and double-crosses good, hard-working productive people in this country.
Obama is nothing but a thug and a common thief.
I don’t assume that local pols are borrowing responsibly. It’s the job of the local citizenry to keep their local pols accountable for their actions. Build a school, hopsital, stadium or skating rink or not, that should be the call of citizens in their local municipalities.
But I can tell you one thing, the Federal government will not do a good job of this. In this first case, they are more inefficient than local governments (and both are less efficient than the private sector). But secondly, as you have allluded to, this is nothing more than replacing local governance (with its attendant risk of corruption) with the intentional and far more pernicious corrupting influence of the Federal governemnt and Democrat party.
The whole deal with tax-free muni bonds is to make them desirable enough that municipalities and other can issue them at below market interest rates. And the only reason buyers are willing to buy bonds that bear below-market rates is that they can make that up with the tax breaks. With no tax break, then munis will have no advantage in the market and will have to bear interest rates comparable to corporate bonds to compete.
Thus what Obama gives with one hand (more Fed dollars for infrastructure) he takes away with the other hand (higher borrowing costs for those very same projects). Naturally, the burden of higher borrowing costs will fall on all entities while only Obama’s favored entities will receive the ill-gotten gains. Typical favoritism by the Obammunists. Financially, this whole thing is nothing more than a shell game, with a net-zero financial result, that is, a typical zero result for a zero President named Zero.
Why are muni bonds not taxed by the fed? Because the Fed doesn't want the state's to levy a tax on Federal bonds.
Why is tax free status important? It gives the government the advantage of paying lower rates than the competition.
In effect, this is the Federal government attempting to force investors out of muni bonds and into federal bonds. There will be retaliation.
There will be a negative effect, as both local and federal governments have to increase rates to attract buyers.
Why are muni bonds not taxed by the fed? Because the Fed doesn't want the state's to levy a tax on Federal bonds.
Why is tax free status important? It gives the government the advantage of paying lower rates than the competition.
In effect, this is the Federal government attempting to force investors out of muni bonds and into federal bonds. There will be retaliation.
There will be a negative effect, as both local and federal governments have to increase rates to attract buyers.
But The Sun King and his cronies will get a piece of all such projects from now on via their "Infrastructure Bank", and that's what's important.
The "Infrastructure Bank", if it ever comes to pass, will be the most massive boondoggle of all time. It will dwarf TARP, Porkulus, the S&L debacle, everything.
Very well stated post, precisely explaining a complicated game of more Federal control.
Indeed it’s the old GM bail out plan then you own them.
Hey Warren Buffett! Ask, for higher taxes, and you shall receive!
Thus what Obama gives with one hand (more Fed dollars for infrastructure) he takes away with the other hand (higher borrowing costs for those very same projects).
well said
His Democrat buddies who run Democrat cities will not be pleased. Floating bond issues is how they’ve managed to overspend their revenues for five or six decades now.
Hillary is going to run, and the party isn’t going to give her a choice in the matter.
Mayors in big cities are predominantly democrat. Obama seems indiscriminate now. Next he’ll announce a cap and tax on trial lawyer awards.
Amen. One of the best descriptions of him I’ve ever seen.
Heh. The Democrats are hitting themselves. Taxing muni bond interest would cut the socialists’ revenues and counteract the huge amounts of federal funding that they receive for regulating against real private businesses.
It seems like it’s working that way.
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