What Muni Investors Need to Know About the US Election

As the 2024 U.S. presidential election approaches, municipal bond investors are closely watching proposed tax policies that could impact the market. Key provisions of the 2017 Tax Cuts and Jobs Act are set to expire in 2025, with potential changes to personal income tax rates, the alternative minimum tax (AMT), the state and local tax (SALT) deduction, and capital gains taxes.

Higher personal income taxes and the potential expiration of the AMT exemption could increase demand for municipal bonds, while changes to the SALT deduction could further enhance their appeal, particularly in high-tax states. Additionally, higher capital gains taxes could reduce portfolio turnover as investors delay taking gains.

Despite these concerns, historical evidence suggests that presidential elections have had minimal impact on municipal market returns. Municipal bonds remain attractive due to high yields, strong valuations, and solid issuer fundamentals, making them a compelling option for long-term investors.