Tags: municipal bonds

A proposed cap on the tax advantages of municipal bond interest looks dead now that "people who understand" the credit markets are weighing in on the issue.

If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits.

Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization.

Plus, get other membership benefits, including:

Analysis daily of issues affecting advisors Aggregation of news from dozens of sites targeting wealth managers Reviews by advisors of practice management applications 30 independent experts blogging on advisor business issues 24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE Register Now

The September stimulus package sent to Congress would have cut off the exemption on muni interest to 28% of all income for upper-middle-class families earning a joint $250,000 or more.

The bill failed. However, pushback from the local financing community got the White House to realize that making the tax treatment less attractive would hurt already-fragile demand for muni debt.

The proposal is now reportedly off the table.

Some influential think tanks and former congressional types have begged for ending the exemption on muni interest, arguing that the federal government simply can't pass up the revenue right now.

Muni advisors argued back that nobody in the government understands the way the asset class works.