Many in markets may be cheering Donald Trump’s tax plans. It amounts to a major tax cut for business owners and the wealthy. However, one of the darker sides to Trump’s plan could be its effect on municipal bonds, a favorite among retirees. The reason why is that the overall tax cut would lower the overall incentives to buy munis versus other types of fixed income, as interest earned would be taxed at a lower rate.
FINSUM: This seems like it could lead to some sizable losses for muni bonds, as it would weaken one their key features. The primary impact will be on middle-income retirees, who are the primary buyers of munis.
Source: Wall Street Journal