Mutual Exclusion Doctrine
Categories: Regulations
Sure, getting taxed kind of sucks...but have you ever thought about taxes as a glass half full? What if the federal government, state government, and local government all held out their expectant little hands, taxing you on the same government-issued security?
Well, if they don’t, it’s thanks to the mutual exclusion doctrine. The mutual exclusion doctrine is a contract between different levels of government that agree that federal security dividends (bond interest) are only taxable at the federal level.
The mutual exclusion doctrine is mutual because it also goes the other way: any securities issued from lower levels of government that make interest can’t be taxed by the federal government (like municipal bonds).
Ah, the fresh air of mutual exclusion...don’t you love that smell?