“Some proposals being informally floated call for a reduction in the tax benefit on these securities from 35% to 28%; others would limit the universe of entities eligible to issue tax-exempt debt in a move to boost government revenue. That has some investors concerned about the immediate future of this asset class,” reports ETFdb’s Michael Johnston at Forbes.
Yet while changing the tax policy that applies to munis has been discussed in the past, each time it has induced major pushback from municipal investors and issuers, said Matt Tucker, head of fixed-income strategy at BlackRock’s (NYSE: BLK) iShares.
“While any such change would obviously have an impact on the markets, we do not believe significant tax overhaul that would change municipal bonds’ tax-exempt status is likely to happen,” BlackRock analysts added. “In our view, there is too much support of the current exemptions to allow for drastic changes.” [Muni Bond ETFs Hit]
iShares S&P National AMT-Free Municipal Bond Fund
Full disclosure: Tom Lydon’s clients own BOND.