Obama Re-Election Makes Muni Tax Cap More Plausible, Posner Says

President Barack Obama’s re-election makes his proposal to cap the tax-exemption for interest on municipal debt “more plausible,” said Matt Posner at Municipal Market Advisors.

Obama, in an effort to trim the federal budget deficit, has proposed limiting the value of the muni-bond tax break for higher earners to 28 percent, down from 35 percent. Local governments can borrow more cheaply through the $3.7 trillion municipal market because investors are willing to accept lower yields in return for tax-free income.