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The Week in Public Finance: Tax Reform Hits Muni Market, California Plays Tax Games and Local Pensions Do Better Than State

Liz Farmer

Even though the GOP federal tax plan has yet to take effect, the drastic cuts to the corporate tax rate have already started impacting the municipal bond market. Municipal bonds are used to finance local infrastructure projects and affordable housing. Preliminary data is showing that banks have slowed their investment in the muni market, because with the corporate tax rate lowered from 35 to 21 percent banks and other corporations will begin earning more from other investments, which means they would have less need for the low interest rate muni bonds.