Macro and Market
Tax

Infrastructure and Tax Proposals Lift Muni Market’s Profile

By David Moore, Greg Torretti
JUN 07 | 2021
Looking at a bridge at sunrise.

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.

Authors
David Moore

David Moore

Director of Municipal Research

Greg Torretti

Greg Torretti

Senior Director Product Management

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

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.