You think you benefit, but the truth is, you do not

I realized years ago that I am basically a rules guy. For the most part, I accept the rules of the game, the laws of the land, the way it is, etc. and live my life as such. I don't believe in rocking the boat if not necessary. People usually do over the pettiest of items.

Point in case is a couple in Kentucky suing the state for the treatment of bond interest from their out of state bonds. Quick lesson in municipal bonds. Just about all municipal bonds are free of federal taxes.* That interest income is still subject to state taxes. However, there are 42 states that do not impose taxes on their own approved issues. Thus, if you live in California, there is a tax advantage to buying Cali bonds as they are exempt from Cal taxes. But a state like Wisconsin taxes all state muni bonds unless they have been granted an exemption. Thus buying a Whiskey bond (muni slang for Wisconsins bonds) has little advantage over a bond from any other state that has a higher yield.

Basically, this KY couple is arguing that they shouldn't have to pay taxes on any municipal bonds, not just KY bonds. They claim it violates interstate commerce. What is potentially does is cause a lot of people to lose a lot of money, including these chuckleheads.

There is basically two outcomes. The Supreme Court says yes, states can not favor their own issues on taxes, they must be equal. This allows states to choose to tax everything or nothing. Which do you think they would choose?

Choose to tax everything and the states gets a lot of money, the value of these bonds go plummeting as millions of dollars of market value is wiped out. People would sell as they can get a better yield on other issues, whether taxable or not. It would particularly affect states with poor credit ratings.

But let's say the states decide not to tax anything. Now they have a revenue shortfall. How do you think they will make up the loss of revenue. Higher taxes. Or as the governor of Wisconsin likes to call them, user fees.

But wait, the value of bonds would also take a hit. If I own a KY bond paying 5% that has a tax equivalent of 8% (assuming a high tax bracket), the value of my bond will decrease to a price level equal to similar bonds to generate a similar interest rate. That is what a market does.

So this KY couple is arguing a stupid point. They will lose money if they win. Sure their tax burden will be better but the value of their securities will take a fall as investors will look to better returns elsewhere.

Now that I have bored you, I came across a hell of an idea. Check this out. This chain of pubs in the UK allows you to buy a friend a drink by text message. You set up an account with the pubs. You can go online and buy your friends drinks. They will receive a text message they can show the bartender to receive the cocktails. It is like taking the dial-a-shot to a new level. Brilliant!

Summerfest is filling in the rest of the slots. Jackyl will be there on July 2. Milwaukee mainstay the Violent Femmes shows up on opening night. But the biggest news maybe for Summerfest may just be who in NOT playing this year. In a majfor coup the State Fair has booked the Bodeans. Stolen them away from Summerfest.

The Bodeans always seem to be the last minute fill in band for the Amphitheater at Summerfest. If they couldn't book anyone big, they would go get the Bodeans and fill the place. It was good business. But it would appear that won't happen this year even though they have one date left to fill.

I think I have a time tunnel in my hallway. For whatever reason this morning, I found myself getting out of bed 3 minutes earlier than my usual time. How did that translate into leaving the house 10 minutes earlier?

*Of course there are exceptions to the rule. There are some muni bonds that are taxable. They are usually public work projects involving a corporation that may benefit from said project.