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Q

I could not derive from your article the impact on municipal bondholders. It almost seems as though the article was written more for those who are substantial wage earners, not bondholders. As one who will not currently buy an AMT bond, is there anything in the proposed legislation that would affect me? It seems that your article comes up a little bit short on what the proposed legislation would do to either those that buy AMT bonds, or those that don’t.

A

James A. Klotz responds:

The impact of the AMT on bondholders is of vital interest to us, as it is to you. We’ve detailed its effect on bondholders in numerous articles beginning in 2001.

When Congress enacted the AMT almost 40 years ago, the purpose was to target affluent individuals who were avoiding income taxes completely. Taxing rich people is always popular.

What you’re missing is Congress is only exploring tax reform because the AMT has ensnared millions of middle-class Americans – not because they are concerned with providing relief to “substantial wage earners.”

It affects you because most of the discussion in the tax reform committees has focused on eliminating the AMT entirely. If successful, it would allow you to purchase higher yielding private purpose tax-free bonds, which you must avoid now because you’re subject to the AMT.