-About Municipal Bonds, How it Works

One More Thing About That Election …

William Tucker, American Spectator

Excerpt:

So here's how it works. When the federal government raises taxes and tax rates, it makes municipal bonds more attractive. People try to "shelter" their money so they pull it out of the private sector and put it into government. New York has so many taxes that the bond sellers have invented something called "triple-tax-exempt," which means income from the bond is exempt from federal, state, and local taxes -- which can amount to 50 percent of the average income.

So this is the way government builds on itself. The idea when you're in government is you want government to grow, because the more money there is to play around with, the more you're likely to collect some yourself. Government raises taxes. That makes municipal bonds more attractive. People buy more municipal bonds, which makes it easier for governments to borrow. Governments borrow more, which allows them to hire more people, who become public employees, who become unionized public employees, who vote 90 percent Democratic, who elect Democrats, who raise taxes.
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It's the way she [Teresa Heinz-Kerry] avoids taxes that also matters. And it's why John Kerry's huge constituencies in the public employee unions aren't upset about high taxes, either.
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