Why are there so few Oregon municipal bond funds, either open-end or closed-end? With a 9% top marginal state income tax rate, you would think Oregon would be a great candidate for a single-state muni fund. -- Peykue Rasmartin
The field of Oregon muni bond funds isn't all that small, considering that Oregon is a relatively small state and doesn't issue a whole lot of bonds.
The 9% top income tax rate, which kicks in for incomes over $5,650 (Jeez, Salem, why bother exempting anyone?), does create "decent demand" for single-state funds, says Michael Hamilton, vice president and fund manager at
U.S. Bancorp's First American Asset Management
and co-manager of
Aquila Tax-Free Trust of Oregon. The rate, easily the highest to apply so broadly, gives Beaver State residents a strong incentive to find a tax shelter.
tracks 10 open-end Oregon funds with combined assets of $1.64 billion as of the end of March. (There are no closed-end Oregon funds in Lipper's database.)
That's small potatoes compared with the 64 open-end and 22 closed-end New York funds with combined assets of $29.6 billion. But New York has a population of more than 18 million and issued $36.5 billion of munis last year, according to
Thomson Financial Securities Data
. Oregon's population is about 3.3 million, and $2.5 billion of munis were issued last year.
Oregonians' menu of muni funds compares favorably with that of South Carolina, which has a population that's only slightly larger and a top state income tax rate of 7% applying to incomes over $11,400. Lipper tracks just seven South Carolina funds with combined assets of $563 million.
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