Good News for Municipal Bonds
July 30, 2018
Two U.S. Supreme Court decisions have combined to lend support to the financial viability of municipal bonds.
The U.S. Supreme Court issued two decisions that offer some long-term support to the credit viability of municipal bonds. The first decision struck down mandatory fees for public employee union members to cover the cost of contract negotiations and representation. The consensus believes this will enable state and local governments to lower labor costs. The second decision allows states and local government to increase the collection of sales taxes on internet retailers. The estimate is the increased tax revenues could range from eight billion to twenty-six billion dollars annually. Both decisions should enhance the ability of municipal bond issuers to pay bondholders their scheduled interest and principal payments.