Zero taxes on municipal bonds doesn't put extra money in the hands of investors. It just lowers the rate that investors demand on their investment.

Back when I was in college I had an internship in the investment division of a major bank. They sold both municipal and corporate bonds. The munies sold for about 4% and the corporate ones were going for about 6%. Without the tax break the municipalities would have been paying the same 6% as corporations.

This isn't about getting rich people to pay more. Obama's only goal is to make it more difficult for local governments to borrow money. He wants this because the less local governments can do the more people will have to rely on the federal government.

 

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Wish I could say I was surprised.

This has nothing to do with anything other than Obama trying to undermine the states.

 

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Because it's income like any other income?

edit: Haha your point was apparently so dumb you edited it out. I will take that as an apology and admission I was right.

If you didn't get the quote while you had time then I deny I ever said anything dumb.

 

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It is the income that is being taxed. People that work for the government are taxed, I am not sure why the income of capital investors couldn't be taxed. The Fed can subsidize labor by not taxing state employees.


From the stand point of the state their act of borrowing is cheaper but that doesn't mean all of the benefit of the tax break goes to them. The CBO report says it doesn't. So if you really want to argue against that then do so IMO but that is the real basis of the discussion.


That is why I said, seems to make more sense to subsidize the municipalities directly instead of distorting their incentive to borrow.

 

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So when rich people stop lending municipalities money in the form of tax-free bonds, where will municipalities go to get the money to make up that shortfall?



Or are you saying rich people will stick around to pay higher property/business taxes when they could live elsewhere?




Maybe with a gun pointed to their head.




IMHO, Paul led off with a homerun.

But he already knew that.




Vote for Obama 2012!

It could mean your life!

The CBO report says the subsidy lowers the rate and gives money to investors. I think the report says every dollar given up by the Feds, $0.8 lowers the interest rate, $0.2 is extra income for investors.


A more efficient way would be for the Feds to borrow and give the money to the state....instead of borrowing and giving 20% of it to investors.

Obama would love that. Anything that increases the power of the federal government and puts the states under his thumb is a good thing as far as he's concerned.

 

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