The manager of Vanguard's $85 billion municipal bond portfolio, Christopher Alwine, is applauding the Illinois state tax increase, according to the transcript of a recent Vanguard webcast for its clients:
Most issuers are going to have taxing ability, and that's a very powerful tool to have in your tool kit to raise the revenue to service the debt. It's not an attractive option for the politician to make; but it's an option there, and they've proven through time that they are willing to do it.
The latest example that really hasn't gotten as much positive press as it should is Illinois. Illinois certainly has challenges in their budget situation and their pensions. But they took the step raising personal income taxes about 67% to raise 6 billion additional dollars a year, and they're the type of tough decisions that we expect to be made by the issuers over this year.
Let's just say it's a good thing Mr. Alwine is running a municipal bond portfolio rather than a news organization, or, for that matter, a state government.
Earlier FutureOfCapitalism coverage of the politicization of Vanguard is here.