Issues in the Tax Treatment Of State and Local Securities

Income from securities issued by state and local governments is exempt from the federal income tax. For years supporters and critics have debated the merits of the exemption without noticeable progress toward agreement. In an effort to clarify the issues, the Brookings Institution in 1962 called a conference of experts in taxation and capital markets. A summary of the conference and a revision of the background paper on which it was based are presented in a new Brookings study, FEDERAL TAX TREATMENT OF STATE AND LOCAL SECURITIES, by David J. Ott and Allan H. Meltzer. Highlights of the book, which is the second in a special series of Studies of Government Finance, are presented in this Research Report.