Perspectives Blog

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

…e is 43.4%, resulting in many investors taking home barely 56 cents of each dollar earned. Municipal bonds can help investors keep more of what they earn, since the income may be exempt from local, state and/or federal income taxes. As tax rates move higher, investments that provide income exempt from taxes, such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield curve in 2013, as the…

The truth about April’s budget surplus

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 16, 2013

…e from 2013 into 2012 by taxpayers hoping to avoid the higher income tax rates taking effect in 2013. As a result, some of the largesse is a one-time gain. However, the rising stock market is another factor. Individual income taxes rose 12% in the last year (representing nearly half of total receipts) and corporate income taxes rose 25% (about 10% of total receipts). Also, social insurance taxes rose 8% (about a third of total receipts) largely d…

Municipals flashing “buy” signal

Chad Farrington, CFA, Head of Municipal Bond Research | July 8, 2013

…attractive level of tax-exempt income at a good price. See more Market Insights from Columbia Management. * Assumes a 2013 federal income tax rate of 43.4% (39.6% income tax rate + 3.8% Net Investment Income Tax rate). Other taxes are possible. The effect of potential federal income tax phase outs of personal exemptions and itemized deductions is excluded from this schedule. Had they been included, the reported tax rate would have been higher wh…

Engineering a better retirement portfolio

Columbia Management, Investment Team | June 4, 2013

…rtfolio . See more Market Insights from Columbia Management. *In these examples, the 60/40 will be represented by the S&P 500 Index and the Barclays U.S. Aggregate Bond Index, respectively. We do not include the impact of taxes in these examples because of the variation in rates and likelihood of expected changes to the tax code. However, taxes must be factored into the individual investor’s situation, which can be done easily and will transl…

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Research | January 2, 2014

…, fiscal agent and financial advisor. Beyond 2014, however, Puerto Rico needs economic growth to generate additional revenue to meet future obligations. Unfortunately, reducing workforce, cutting other spending and increasing taxes tend to run counter to generating economic activity. This partly explains current market discounts on PR debt, which signal potential future default and investor haircuts as part of a potential debt restructuring. Ther…

Trust accounts and the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | October 9, 2013

…c. The 3.8% net investment income tax (NIIT) does not just apply to the individual investor. It also applies to certain trusts,* and as with individuals, the 3.8% surtax is in addition to ordinary income and/or capital gains taxes owed by the trust. Determining if and when the NIIT may apply in the case of a trust is complex. This article is not meant to be a comprehensive discourse, but rather a high-level overview of where the tax may apply to…

Detroit’s collateral damage

Ty Schoback, Senior Municipal Analyst | October 24, 2013

…ened with a variety of support mechanisms. Such assistance may include bridge financing, transfer of costly services to other governmental agencies, loan or grant funds to cover budgetary gaps and/or an early release of state taxes payable to the municipality. For the state and municipality, the benefits of avoiding bankruptcy are multiple, while the consequences of a filing can be painful, wide-ranging and long-lasting. Importantly, avoiding ban…