State and local governments often exempt their own taxes when issuing bonds, so they could still contain some advantages. Issuers may have to offer higher interest rates to attract investors. Americans For Fair Taxation argue that, after the fair tax goes into effect, corporate bond rates would drop; that new tax free yields will roughly equal their previous after tax value under the income tax; and that state and municipal bond holders would not need to change their rates.
State and local governments often exempt their own taxes when issuing bonds, so they could still have some advantages. Issuers may need to offer higher interest rates to attract investors. Americans For Fair Taxation argue that, after the fair tax goes into effect, corporate bond rates would drop; that new tax-free yields will roughly equal their previous after-tax value under the income tax; and that state and municipal bond holders would not need to change their rates.