william the wie
Gold Member
- Nov 18, 2009
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The reason for putting this subject in politics is that munis are exempt from federal income tax and usually state income tax so states like FL and TX that have no state income tax normally pay higher yields than states that do have income taxes. But that difference has financed much larger borrowing and borrowing costs in the mostly blue states with noticeable state income taxes and growing tax flight. The government shut down is driving the yield on the benchmark 10 year treasury up. Treasury yields are exempt from state income tax. Rising state taxes and shrinking state tax bases means that ever shorter maturity bonds are still around the corner default. When yields on TX and FL munis start moving towards the yield of say NJ or RI panic and bug out boogie among the wealthy will be seen.