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State of munis if corporate tax rates were cut


If corporate tax rates were reduced to, say, 25%, do you think the municipal bond market would be OK in terms of demand?

K.S., Florida


James A. Klotz responds:

An “A” rated corporate bond today will yield approximately 4.50% to 4.75%. This would equate to an after-tax return of 3.375% to 3.56% for an investor in the 25% tax bracket.

Municipal bond rates would compare favorably to these after-tax returns of corporate bonds.

Additionally, munis do not create taxable income that can push an investor into a higher bracket.

Jun 27, 2017

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