Once the taxation starts at the Federal level, it is a matter of time before states begin to do the same. This would lead to double taxation of the interest earned with a muni bond investment. Issues from states with no tax such as Florida and Texas would not be taxed at the state level, but would fall under the Federal tax law.
So far, neither Presidential candidate has spoken out for or against the idea of taxing interest for revenue generation.
Market Vectors High-Yield Muni ETF
Tisha Guerrero contributed to this article.