Midterm Election Measures Could Reshape Municipal Bond Market

According to CNBC, state ballot initiatives in Tuesday’s midterm election could affect the municipal bond market by changing taxes and adding government debt supply. California voters will consider a one-time tax equal to 5% of the wealth of certain taxpayers with at least $1 billion in assets, as well as making permanent a temporary tax increase on individuals earning more than $371,000; that tax is set to expire in 2031. Florida voters will consider raising a homestead exemption to $150,000 in 2027 and $250,000 by 2028. Municipal bond issuance totaled $473.8 billion through September, up 7.8% from the same period a year earlier. Dan Close of Nuveen said tax increases could make municipal bonds’ federal tax exemption more valuable. Cooper Howard of the Schwab Center for Financial Research said demand would need to keep pace with issuance to support total returns.