On Feb 23rd Senator Ron Wyden (D – Oregon) and Senator Judd Gregg (R – New Hampshire) introduced the “Bipartisan Tax Fairness and Simplification Act of 2010” to overhaul what they dubbed a “broken” tax system.

Among other provisions the bill would preclude the issuance of tax-exempt (i.e. muni) bonds beginning in 2011 while changing the exemption of existing bonds into a credit.

All munis issued after 12/31/10 would be taxable. Bondholders would receive a tax credit equal to 25% of the bonds’ interest.

Passage of the bill is unlikely whether in current or reconciled form. Then again handicapping politics is an imprecise science.