Congress' Tax Package Won't Curb Impact of AMT on Munis

Fine, Jacob
May 2003
Bond Buyer;5/28/2003, Vol. 344 Issue 31644, p35
Trade Publication
An increase in alternative minimum tax (AMT) exemptions in the tax package which was sent by the U.S. Congress to President George W. Bush on May 23, 2003 will have no impact on the deterioration of the value of municipal bonds subject to the tax, according to experts. The AMT requires taxpayers to recalculate their income taxes under a separate system that defines taxable income more broadly and may require them to pay more. The yield spread between 10-year, double-A rated revenue bonds subject to the AMT and comparable bonds that are exempt from the tax has risen by 30 basis points to 35 basis points since Municipal Market Data started tracking the spreads. Deduction in regular income tax rates enacted in 2001 and originally planned to be phased in through 2006 would be expedited under the new tax package, so that investors in the highest bracket would pay 35 percent in regular federal income taxes in 2003 instead of 38.6 percent.


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