The federal income tax exemption for state and local government
securities has been a controversial issue for many years. Opponents
of the exemption believe that it is inequitable, reduces risk
investment by high-bracket taxpayers, and costs an excessive amount
to the federal government. Proponents argue that elimination of the
tax exemption would make the cost of borrowing money to many state
and local governments prohibitive. The purpose of the study was to
try to narrow down the differences among experts in taxation and
the municipal bond market on the facts and analyses with regard to
this matter of public policy.
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