debt recovery legislation



debt recovery legislation

The Build America Bonds (BABS) program, a new piece of legislation from the Obama Administration, focuses on the aid to struggling state and local government in U.S. The program, part of the American Recovery and Reinvestment Act of 2009, creates taxable municipal bonds, a radical departure from the long-term tax-exempt status quo for Munis.

While Bonds Issued under the BABS program are fully taxable, the issuer receives a direct subsidy of 35% of the bonds Stated or coupon interest rate. The intention is to some of the benefits of traditional make Muni Bonds for investors outside of the highest tax bracket.

Since for years now been discussion within the Treasury Department and the IRS that the tax exemption for municipal bonds is an inefficient subsidy, as they have the highest Taxpayers exempt from the tax benefit income. Avoid At current tax rates top 35% of group income groups pay on that income. The benefit- obviously, if growth increases / when taxes.

BABS The program has significant advantages if this is the lower income groups, the bracket taxable Income from their investment must be embraced. The program makes it easier for municipalities to increase by appropriate resources in a large new group of Investors who previously participated in the municipal bond arena.

There is still the question of what impact this program could be on existing tax-exempt municipal Bonds have. BABS The program allows only bonds for new projects, not to be sold to refinance debt incurred in the past. An issuer can not BABS to old Fault call. If, therefore, wins the BABS program considerable momentum, municipal bonds are being redeemed on the market less probably too early. As a result of many Bonds already issued, in effect, non-callable. More importantly, when new editions of the tax-exempt bonds are virtually non-existent, the demand for existing problems could increase significantly by the highest taxpayers.

Some critics of the program say that while BABS may have some benefits for those outside the highest tax brackets, the wealthiest individuals reaping the rewards. While this might be the case, I welcome the program to try the goal to bring the average incomes of individual muni bond market. This could very well a nice addition for those who are on their income from investments (as to fight CD's, etc.) and a great asset to the communities in these parts of the country that are straight.

That said, the biggest gainers could only those who already own the old-style version will be tax free municipal bonds. We keep telling our customers to their high quality Arizona tax-exempt bonds.

Brad East, (http://www.bradeast.com) Senior Vice President of Moors & Cabot in Phoenix, AZ, is a 17 year veteran of the securities market and an expert in the municipal bond arena. Moors & Cabot was founded in 1890, and has offices all over the country.

Illinois Association of REALTORS President’s Podcast Featuring IAR President Pat Callan

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