What are municipal bonds primarily used for?

Municipal bonds are primarily issued by state and local governments to fund public projects that benefit the community. These projects often include infrastructure improvements such as the construction of schools, highways, bridges, and public facilities. Since the funding comes from government entities, municipal bonds are typically seen as a way to support and enhance public services without directly charging the public for immediate costs.

The proceeds from issuing these bonds allow governments to raise capital for essential services and infrastructure development, making them a vital tool for economic development and community welfare. Investors are generally drawn to municipal bonds due to their tax-exempt status, as the interest earned is often exempt from federal income tax and, in some cases, state and local taxes as well, which makes them appealing for many individuals.

In contrast, funding private corporations is not the primary purpose of municipal bonds, as they are designed to support the public sector. Increasing tax revenue and providing personal loans fall outside the scope of what municipal bonds aim to achieve, as they do not focus on generating immediate revenue or lending for personal financial needs.