sameeragarwal

Not every dollar of income is taxed the same way. Ergo, loopholes.

transferpricing

But... munis give you lower yield than taxable securities. So, supposedly, your tax savings are offset by the interest that you lose.

smuggycfa

Perhaps because I view "tax loophole" as having a negative connotation, I wouldn't categorize muni's as a tax loophole. The tax-exempt status for most muni's simply serves as a way for the federal government to help promote local development projects. If muni's weren't tax-exempt, towns and states would have to pay higher interest rates to attract buyers, effectively increasing the cost of every project and probably killing a lot of those projects.

ayaz_mahmud369

I recall Ross Perot being slammed for this. He paid something like an 8% effective income tax rate due to his massive muni bond investment portfolio.

This thread could also serve as a nice resource for us rich CFA AFers come tax time.

jmh530

Muni Bonds