Municipal credit is going through a challenging time with concerns over the ability of many states—such as New York, Illinois and California—to withstand the sluggish economy and growing deficits. So are municipal bonds the smart choice for investors?
"With muni's (municipal bonds) you have to take your tax rate into consideration, the lower your tax rate the less attractive muni's are," Ben Thompson, founding principal of Samson Capital Advisors told CNBC's "
"If you are a full tax payer in the U.S., this year you are paying 35 percent. If the Bush tax cuts expire, next year, you'll be paying 39.6 percent. So the value of tax-free income just rises as your tax rate rises," said Thompson.