Build America Bonds: A Transfer from the Taxpayer to the Non-Taxpayer

The [Build America Bonds] program can be interpreted as a wealth transfer from the natural holders of municipal bonds, who are individual U.S. taxpayers, to corporations, pension funds, and foreign investors not subject to individual U.S. income taxes.

That is Andrew Ang, Vineer Bhansali, and Yuhang Xing in a new NBER working paper.

The BABs were a part of Stimulus II. They are a new way for municipalities to finance capital projects. Like the traditional method, BABs effectively subsidize state and local borrowing, but the mechanics are slightly different. Traditionally, the interest on muni bonds is not subject to federal taxation. BABs are taxed, but the federal government subsidizes 35 percent of the interest payment. 

(Note that under both cases, local governments receive a special privelege that private borrowers do not.) Ang, Bhansali and Xing trace out some of the less-obvious consequences of shifting the method of finance.

6 thoughts on “Build America Bonds: A Transfer from the Taxpayer to the Non-Taxpayer

  1. Pingback: Tweets that mention Build America Bonds: A Transfer from the Taxpayer to the Non-Taxpayer -- Topsy.com

  2. Pingback: ajmkbxea

  3. Build a brighter future

    Earn £400 to £600 a month working part time (10-15 hours per week, alongside your existing job) just delivering and collecting Kleeneze Catalogues. PLUS get the chance to qualify for two 5 star ALL INCLUSIVE holidays a year, just for doing your job well!

  4. Сellcept

    Hi, I can’t satisfaction in how to mingle your chairperson in my rss reader. Can you Plagiarist me, deflect
    It sounds like you’re creating problems yourself during apartment to alter this repress as contrasted with of looking at why
    their is a unruly in the maiden place.

  5. Pingback: MAX

Comments are closed.