Municipal Bond ETFs Could Benefit from Tax Hikes – ETF Trends




A recent Yahoo! Finance article noted that about 75% of Americans would support higher income taxes if the money went to the right places. A Nasdaq article pointed out that in the event that Democratic candidate Joe Biden wins the upcoming presidential election, this tax hike could benefit municipal bond exchange-traded funds (ETFs).

For investors still wanting municipal bond exposure, but don’t want an actively managed fund option, here are a is one option: iShares National Muni Bond ETF (NYSEArca: MUB)–seeks to track the investment results of the S&P National AMT-Free Municipal Bond IndexTM. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. The index measures the performance of the investment-grade segment of the U.S. municipal bond market.

“The low-rate environment is great for the fixed-income market. Moreover, muni bonds are known for yielding higher than treasuries,” a Nasdaq article said. “With the Democratic candidate having solid chances of winning, muni bonds may see great days ahead as these bonds are exempt from federal taxes, and most state and local taxes.”

“Biden would also repeal the $10,000 cap on the state and local tax deduction, a change from 2017 that increased taxes on high-income households, particularly in states such as New York, New Jersey and California,” the article added.

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