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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. This article is based on a discussion by the same title conducted at the 36th Annual Conference of the National Federation of Municipal Analysts held in Charleston, South Carolina, May 7–10, 2019. Marshall Kitain is head of municipal credit analysis and investor marketing at JP Morgan. Ann Ferentino is portfolio manager and senior investment analyst at Federated Investors. Jamie Doffermyre is municipal sales manager at Citi. The Honorable Stephen K. Benjamin is mayor of Columbia, South Carolina. The conference proceedings are being published in a special double issue of Municipal Finance Journal, as Volume 40, Number 4 and Volume 41, Number 1.

Keywords: Municipal market, Tax Cuts and Jobs Act (TCJA), state and local tax (SALT) cap, advance refundings, alternative minimum tax (AMT)

Affiliations:  1: JP Morgan; 2: Federated Investors; 3: Citi; 4: Mayor, Columbia, South Carolina.