The most important impact to the municipal bond market directly relates to who the players will be that will dictate the tax reform agenda. In this election, tax reform has been perhaps the highest profile issue shared by both candidates as well as those running for Congress. Proposals to date do not appear as well defined or even sketched in stone that there is a likely outcome — no matter which party comes away as victor. Proposals span from those that dramatically change the tax code that might involve the elimination of tax exemption to those that tweak the tax code to eliminate deductions. However, even before the next president is inaugurated, the unresolved fiscal cliff scare could be extremely bullish for muni bonds in general as the Bush tax cuts expire and the economy’s potential for a recession becomes highly elevated.
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