If this sounds far-fetched, take note that the scheme is already in place for supposedly tax-exempt municipal bonds.

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Tierney has introduced tax reform legislation that would require all tax-exempt municipal bonds to be issued where there would be a direct-pay subsidy of 28% after this year.

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The criminal information to which Hertz pled guilty charged, among other things, that Hertz engaged in fraudulent misconduct in connection with the competitive bidding process for the selection of the firms to provide instruments in which municipal issuers, in accordance with federal tax laws and regulations, temporarily invested the proceeds of tax-exempt municipal bonds.

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President Barack Obama has proposed limiting or ending the tax-exempt interest on municipal bonds for upper income Americans.

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Among other things, it leaves out tax-exempt interest on municipal bonds, contributions to retirement accounts, and the earnings of those accounts.

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Tax-exempt interest from municipal bonds is excluded.

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The comments have local politicians looking to state legislators for some sort of guarantee program, says Buck Landry, a managing director at Morgan Keegan, a Memphis investment bank that dominates the market for underwriting tax-exempt municipal and local bonds in the region.

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Such conduct caused municipal issuers to file inaccurate reports with the Internal Revenue Service and placed the tax-exempt status of the underlying bonds in jeopardy.

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