Primer on Municipal Bonds: Municipals Educational Series

Research evidence excerpt

Primer on Municipal Bonds: Municipals Educational Series

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Municipals Educational Series

Primer on Municipal Bonds

Primer

The basics of municipal bonds 17 June 2026

We discuss how the market began, its composition, the different kinds of short-term Municipals

instruments, the size of the market, the changing nature of bond insurance and the United States

importance of the tax treatment of municipal bonds. Given the ongoing debate in

Congress over the future of federal spending and revenues, we think it is a good time for Table of Contents

investors to familiarize themselves with the revenue sources supporting various types of

Highlights 2

municipal bonds.

Historical perspective 2

We remind our readers that 2017's Tax Cuts and Jobs Act (TCJA), among other items, Features of a municipal bond 3

decreased the top individual tax rate to 37.0% from 39.6%, lowered the corporate tax Overview of the municipal market 5

rate to 21% from 35%, capped the State and Local Tax deduction (SALT) at $10k and Build America Bonds 10

relaxed the individual Alternative Minimum Tax (AMT) significantly. Those TCJA High yield municipals 11

individual income provisions were set to expire at the end of 2025. However, these Municipal issuance 12

changes were made permanent by 2025's enactment of the One Big Beautiful Bill Act Municipal bond ratings 16

(OBBBA). Notably, OBBBA included a higher SALT cap of $40k for those earning less Municipals’ tax-exempt appeal 18

than $500k, increasing 1% annually through 2029; the SALT cap reverts back to $10k in

Research Analysts 27

2030. While some feared Republicans’ efforts would also include the elimination of the

municipal tax-exemption as a potential revenue raiser, the exemption was left intact.

Yingchen Li