Another reason why Teresa wants to raise your taxes

The Wall Street Journal has two recent articles about Teresa Heinz-Kerry’s taxes (here and here), following the disclosure (a very incomplete one at that!) of her tax return. A couple of readers noted another reason why the superrich like THK want to raise our taxes. Writes O.G. of New York:

In "Teresa's Fair Share" you miss the fact that the tax-exempt investments of Sen. Kerry's wife provide a financial reason for her, and by extension her husband, to be so enthusiastic about raising income tax rates. When a tax-exempt municipal bond is issued, the market accepts an interest rate that is at least equal to the net after-tax interest rate of an equivalent taxable security. When tax rates are cut, newly issued equivalent municipal bonds must pay a higher interest rate to be equal to the net of a like taxable bond. So, if you want to sell municipal bonds that were issued when taxes were higher, you have to sell them at a capital loss in order for the effective interest rate to be equal to that found in the current market, ceteris paribus. Conversely, the value of your tax-exempt bonds can increase, if taxes go up. Therefore, Sen. Kerry's putatively sacrificial proposal to raise income tax rates on the wealthy, instead of hurting him, could have the self-serving effect of increasing the value of his wife's bond portfolio.