In case you missed the news item last month, there was a court ruling in Kentucky relating to the taxability of out-of-state municipal bonds for residents of the state. The court ruled that the interest on the out of state bonds is not subject to state income taxes for the residents, due to Interstate Commerce laws. If this ruling is upheld, then it will be a major benefit to muni owners if this decision spreads to other states. It would mean that a Califonia (or New York or any other high state tax state) municipal bond investor would not be limited to buying munis from just their own state. They could now diversify across several states.
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