A Thought About Using Muni Bonds to Finance Environmental Projects

The Supremes just handed down their decision in Kentucky Dep't of Revenue v. Davis where they upheld a tax exemption for interest on state and local muni bonds. From what I gather the Court relied heavily on: 1) the fact that the selling of muni bonds is a traditional state activity that funds things like infrastructure and 2) the market participant exception to the dormant commerce clause. 1 is the only one that really garnered any kind of majority. There is much more to the opinion of course.

My point is that given the fact that a $1.6 bil environment and energy bond bill, H4561, is currently pending in the legislature, I think this decision should be applauded. If people know that they won't have to pay interest on munis in Mass they will be inclined to buy more of them. If they buy the H4561 bonds this helps the environment. There's probably a hole in that logic somewhere (probably in the area of undue burdens on personal choices about how to invest) but I don't see it yet.

I guess I'm just wondering if anyone has any thoughts.

Manu

Here is what some smarter people have to say about Davis:

http://prawfsblawg.blogs.com/

http://taxprof.typepad.com/