Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending
Why Government Bonds Have a Hidden Tax Cost
In this episode of The Fiscal Policy Podcast, Lucas and Luna explore a little-known cost embedded in government bonds: the tax drag that eats into yields for ordinary investors. Using the case of US Treasury bonds versus municipal bonds, they break down how tax treatment varies by bond type, why that matters for state and federal budgets, and what it means for the $28 trillion Treasury market. Lucas explains the concept of tax-equivalent yield with a concrete example — a 4% municipal bond may effectively yield more than a 5% Treasury for a high-earner in California. Luna pushes back on…
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