| For Immediate Release |
Contact:
Hud Englehart
Beacon Advisors
773.281.1100
hud@beaconadvisors.us
|
Bernardi Study Warns Against Repeal
of Tax Exemption for Municipal Bonds
Chicago, IL, December 14, 2011-- Citing a set of unintended,
potentially adverse consequences, one of the Midwest's
leading municipal bond broker-dealers today called on
legislators and policymakers to analyze all the facts
before moving to eliminate tax exemptions for investors
in the municipal bond market.
"Tax-exempt municipal bonds are the anchor of
a highly efficient, remarkably productive capital market,"
said Ronald Bernardi, President of Bernardi Securities,
Inc. in Chicago. "We've studied the possible effects
of repealing the exemption and we think the results
are more notable for the perils they portend than the
benefits they reveal."
In a white
paper distributed to clients and lawmakers this
week, Bernardi cited these key concerns with repeal
of the exemption on municipal bonds:
- Non-partisan market researchers estimate the revenue
gain from repeal to be 65 percent lower than government
estimates that unrealistically assume individuals
will not adjust their portfolios and exit when the
exemption is eliminated.
- Supporters of repeal do not take into account jobs
and other benefits that accrue to taxpayers as a result
of projects that are financed with tax-exempt bonds.
Repeal at a time when policymakers are counting on
public infrastructure projects to spur job growth
seems antithetical to such efforts.
- One of the proposed alternatives – a taxable
security with a guaranteed interest subsidy from the
federal government – puts national taxpayers
on the hook for local debt programs and creates the
specter of another FNMA-FREDDIE MAC disaster along
the lines of the subprime mortgage. Subsidizing taxable
securities has the effect of shifting local debt obligations
to an already burdened US Treasury.
- Federal intervention also crosses the line when
it comes to reciprocal immunity and separation of
powers. Local authorities under such a plan will lose
autonomy when it comes to their own financing and
project management.
Bernardi Securities’ report concludes that tax-exempt
bonds have been “a critical source of capital for
states and municipalities and, as a readily available
financing vehicle, support one of the nation’s most
consistent and reliable sources of job creation.”
“That being the case, the tax-exempt municipal market
does not need to be restructured or, in parlance du
jour, ‘occupied,’ Bernardi said. “Instead,
its status needs to be reaffirmed so that it can keep
on doing its job without forcing new and unnecessary burdens
on issuers, investors and taxpayers.”
About Bernardi Securities, Inc.
Bernardi Securities, Inc., headquartered in Chicago,
Illinois, specializes in municipal issues and offers clients
a proven, conservative approach to municipal investing.
The company’s commitment to research and active
portfolio management has consistently produced solid returns
for client portfolios – even during the 2008 financial
crisis. The firm also acts as an underwriter and has underwritten
and marketed over the past few years more than $1 billion
in bond issues to help finance public purpose municipal,
county, school, park and water/sewer districts throughout
the country.
The Case for an Efficient, Low-Cost, Job-Creating Tax
Expenditure
This document has been
prepared by Bernardi Securities, Inc. (BSI) for our clients
and other interested parties. Within this document, we
may express opinions about the direction of financial
markets, investment sectors, trends, and taxes. These
opinions should not be considered predictions of future
results, and are subject to change at any time. Past performance
is not indicative of future returns. Nothing in this document
represents a recommendation of any particular strategy,
security or investment product. This information is provided
for educational purposes only and was obtained from sources
considered reliable, but is not guaranteed and not necessarily
complete. BSI offerings are made by prospectus or official
statement only. Income may be subject to state and local
taxes and the federal alternative minimum tax. Additional
risks associated with investing in municipal bonds include
credit risk, interest rate risk, and reinvestment risk.
Please consult your tax professional regarding the suitability
of tax-free investing. Please consult your investment
specialist for more information.
Municipal bonds not FDIC insured * May lose principal
* Not appropriate for all investors
