Infrastructure and Tax Proposals Lift Muni Market’s Profile

June 7, 2021

Key Takeaways

  • We believe the traditional infrastructure projects highlighted in the proposed American Jobs Plan support the municipal (muni) market.
  • The proposal to raise corporate taxes to pay for the projects could fuel demand for tax-exempt munis, which would benefit the muni market overall.
  • We believe the American Jobs Plan promotes job gains and productivity, which ultimately should support economic growth.
  • Despite the Democrats’ control of Congress, there’s some room for negotiation on the tax rate and size of the infrastructure plan.
  • We expect most spending provisions of the legislation to pass, largely because Senate Democrats might use the budget reconciliation process to avoid a Republican filibuster.

President Joe Biden recently revealed his American Jobs Plan (AJP), a massive eight-year spending proposal for infrastructure and other projects. The plan’s original $2.3 trillion price tag would equal approximately 1% of annual U.S. gross domestic product (total economic output in goods and services) in each year of the legislation’s lifespan. The Biden Administration has subsequently proposed reducing the size of the plan. The administration is seeking higher corporate taxes to pay for the legislation.

We believe higher tax rates, along with the AJP’s infrastructure mandates, should benefit the muni market and muni investors. We also expect the proposal to promote job growth and broad U.S. economic gains.

Read the full report below.

Market Perspective: Infrastructure and Tax Proposals Lift Muni Market’s Profile

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