In recent years, Congressional stock trading has come under intensified scrutiny as lawmakers engage in investments potentially influenced by their legislative committee work. Despite ongoing criticism and notable cases, stricter self-imposed limits have yet to be implemented.
A New York Times report last year highlighted over 3,700 trades by lawmakers over three years, which revealed potential conflicts between public responsibilities and private finances.
Today, on December 27, we turn our focus to another alleged avenue exploited by Congress members to avoid taxes and growing wealth: municipal bonds.
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Why are municipal bonds popular among Congressmen?
Quiver Quantitative, an alternative trading platform that meticulously tracks stock trades made by US politicians, said some of the richest members of Congress may have been utilizing municipal bonds to avoid paying taxes.
The reason for that is because municipal bonds “are generally exempt from federal taxes,” Quiver noted in its December 26 post.
This exemption becomes particularly advantageous for wealthy individuals in higher tax brackets because it allows them to generate income without incurring federal taxes on the interest earned, the X account explained.
In addition to federal tax benefits, municipal bonds can also enjoy exemptions from state and local taxes. Depending on the specific bond and the investor’s location, the interest income may be entirely exempt from state and local income taxes as well.
Per Quiver, the top 0.5% of richest Americans held a whopping 42% of all municipal bonds in 2023.
One recent example in Congress is Representative Suzan Delbene’s $1.86 million investment in municipal bonds. The market data provider estimates that Delbene boosted her net worth by over $70 million in the last four years.
The annual salary for most representatives and Congress members is $174,000.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
