Tax Reform and the Municipal Market: The Changing Landscape for Supply, Demand, and Fundamentals

Marshall Kitain, Ann Ferentino, Jamie Doffermyre and Stephen K. Benjamin

Municipal Finance Journal, 2020, vol. 40, issue 4, 15 - 34

Abstract: The Tax Cuts and Jobs Act (TCJA) of 2017 is best known for lowering personal income tax rates for individuals and corporations, but it also included a number of other provisions that significantly affect municipal market fundamentals, supply, and demand. This article discusses how caps on the state and local tax (SALT) deduction, along with other TCJA changes, will affect the long-term creditworthiness of high-tax states; how the volume and composition of municipal market supply will evolve due to TCJA provisions relating to the alternative minimum tax and advance refundings; and if increased municipal demand from life insurers and specialty state retail will offset diminished interest from banks.

Date: 2020
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