Many state proposals aim to cap taxes, which could reduce the revenue used to pay interest and principal on bonds that fund public services and infrastructure.
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Municipal bonds firmed Tuesday as Treasuries rallied out long and equities ended mixed, with muni yields richening by up to seven basis points, mostly at the front of the curve. Chris Brigati of SWBC said the expected weakness from a larger new-issue calendar had not materialized, suggesting enough value and pent-up demand to absorb the bigger supply. He also described a notable Treasury shift, as high inflation data drove a flight to quality out of the AI trade, though underlying inflationary pressures remain. Municipal CUSIP requests rose 2.0% in September from August but fell 1.5% year-over-year, with Texas leading at 184 requests, followed by New York (175) and California (104). In primary sales, Jefferies priced $485.34 million of California State Public Works Board lease revenue bonds, and BofA Securities bought $475.42 million of Virginia Public Building Authority public facilities revenue bonds in a competitive sale.
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Municipal bonds gained at the short end on Wednesday, with yields down up to six basis points, as short-term U.S. Treasuries weakened slightly and equities rose. James Pruskowski of Hennion & Walsh said markets are growing more comfortable ahead of the Nov. 3 midterm elections. ICI reported outflows of $6.908 billion for the week ending Oct. 14, after $5.536 billion the previous week, while ETFs drew inflows of $8.029 billion, their sixth straight week above $1 billion. In the primary market, Jefferies priced $887.48 million of Kentucky Public Energy Authority gas supply revenue bonds, and the Dormitory Authority of the State of New York sold $1.616 billion of personal income tax revenue bonds across several series.
- Senate Finance could flip leaders
Control of the Senate is a tight race, and the outcome could change who chairs the Senate Finance Committee, which oversees issues important to the municipal bond market. If Republicans keep control, Sen. Mike Crapo (R-Idaho), chair since 2025, is expected to keep the gavel; if Democrats win, Sen. Ron Wyden is expected to lead with a focus on oversight and affordability. Municipal market groups want the bank-qualified debt cap raised from $10 million to $30 million, a change Crapo has reportedly sponsored. Emily Brock of GFOA said a Democratic Senate could help revive direct pay subsidy bonds, which were hurt by 2013 budget sequestration cuts. The article also says a surface transportation bill is unlikely in the lame-duck session, and that tax packages would struggle while President Trump is in the White House.
- IRS plans lower tax disclosure penalties, including for crypto: Forbes
The US Internal Revenue Service (IRS) is preparing to overhaul its voluntary disclosure program to cut penalties and speed up the resolution of tax violations, including those involving cryptocurrencies, according to Forbes. IRS Criminal Investigation Chief Jarod Koopman said the revised program is targeted for launch before December, with cases aimed to be resolved within 120 days after taxpayers complete the required submission process. Digital assets would not get a separate disclosure process but would follow the same procedures as other tax noncompliance, and penalties are expected to be substantially lower, though no specific figures were given. Separately, the Digital Asset Tax Certainty Act, whose Section 502 would set a process for correcting past crypto violations with defined penalties, cleared the House Ways and Means Committee in September.
- A New Flat ( Sort of ) Tax Proposal for California
Economists Robert E. Hall and Michael Woodford, winners of the 2026 Nobel Prize in Economics, have proposed a near-flat tax scheme for California based on Hall and Alvin Rabushka's plan. Under it, businesses and households both pay a flat 19% rate: businesses are taxed on profits excluding wages, pension contributions and capital investment, while households pay 19% only on wages above an adjustable exemption, keeping the system progressive. The article cites a 1985 version in which a family earning $25,000 paid an average rate less than half that of the highest earners. The author notes that this is still a tax on income and recalls that the federal FairTax consumption-tax proposal never advanced in Congress. California voters will decide in November on a one-time 5% tax on assets above $1 billion, which Manhattan Institute polling suggests is likely to fail.
- US Middle - Income Group Faces $1 , 700 Average Net Cost Increase in 2026
The Institute on Taxation and Economic Policy estimates Americans in the middle fifth by income face an average net cost increase of $1,700 in 2026, as higher prices and health costs outweigh tax benefits. Its October model puts the average increase at $750 for the poorest fifth, while the richest 1% by income would see an average net benefit of $12,560. The estimate combines a 2025 tax law, the expiration of expanded ACA premium tax credits and prices that rose more than an earlier federal forecast. These are modeled group averages rather than changes in individual households' finances. Separately, a Federal Reserve estimate shows the top 1% by net worth held 32.5% of U.S. household wealth in Q2 2026, up from 31.7% in Q1.
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