Tax-Exempt Bonds

Research Report

Tax-Exempt Bonds

From The Encyclopedia of Taxation and Tax Policy
October 1, 1999


Tax-exempt bonds are issued by a state or local government, and the interest on them are exempt from taxation. These bonds have several fundamental characteristics: length of maturity, security, new issue versus refunding, arbitrage earnings, and public versus private purposes for issuing the bonds. Moreover, the bonds are an important factor in four economic policy issues: intergovernmental fiscal relations, the federal budget deficit, resource allocation, and tax equity.

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