Investigations Suggest Wealthy Congress Members Use Municipal Bonds for Tax Evasion

There’s increasing scrutiny around Congressional stock trading, especially given the potential conflict of interest with lawmakers’ legislative duties. Despite this, more stringent regulations on such activities remain unenforced.

A New York Times report from the previous year shed light on over 3,700 trades by Congressional members across three years, highlighting a possible clash between their public duties and private financial interests.

As of December 27, a new focus emerges on how some members of Congress might be leveraging municipal bonds to evade taxes and accumulate wealth.

Municipal Bonds: A Tax Haven for the Wealthy in Congress?

According to Quiver Quantitative, a platform that tracks politicians’ stock trades, wealthy Congress members are possibly using municipal bonds to dodge federal taxes. Municipal bonds are known for their federal tax-exempt status, which proves highly beneficial for individuals in higher tax brackets by allowing tax-free income generation.

Quiver’s post on December 26 emphasized that this tax exemption is particularly lucrative for the rich, as it helps them earn income without federal taxes on the interest. This benefit extends beyond federal taxes, with certain municipal bonds also offering exemptions from state and local taxes, depending on the bond type and the investor’s location.

Data from Quiver revealed that in 2023, the top 0.5% of the wealthiest Americans held about 42% of all municipal bonds.

An example from Congress is Representative Suzan Delbene’s investment of $1.86 million in municipal bonds. Market analysis suggests that this investment may have contributed to an increase in her net worth by over $70 million in the past four years.

This report comes in the context where most members of Congress and representatives earn an annual salary of $174,000.