Mario Burgos » Blog Archive » It’s a Bond, Not a Tax Increase

It’s a Bond, Not a Tax Increase

Governments love to issue bonds for projects. Usually these push for new bonds are accompanied by claims that new bonds will not raise our taxes. But, what happens when the state and local governmental entities that push for the bonds ends up unable to pay for it?

The $2.9 trillion municipal-bond market has been stung recently by worries that some cash-strapped cities or states won’t be able to pay off or roll over debt. Costs have risen broadly for municipal borrowers. The market also faces challenges from the expiration of the Build America Bonds program, which helped cities and states borrow $165 billion at interest rates held down by federal subsidies.

Can you say, “Tax increase?”

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