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Lisa Napoli: Bonds buyers, listen up: The Supreme Court hears oral arguments today in a case that could have a major effect on the municipal bond market. The court will decide whether it’s legal for states to exempt in-state bond interest from income tax while taxing out-of-state bonds. From Washington, Jeremy Hobson reports.

Jeremy Hobson: Giving tax breaks to investors who buy in-state municipal bonds is the law of the land in most of the country.

Thomas Doe: Anything that can be done to keep the interest rates low is certainly in a state’s best interest.

Thomas Doe of the Massachusetts research firm Municipal Market Advisors says if the court finds the in-state discount unconstitutional:

Doe: The impact would be dramatic.

But the plaintiffs in the case have argued that favoring in-state bonds violates the Constitution.

Brian Galle at the Florida State University Law School agrees:

Brian Galle: It discriminates against interstate commerce. That is, if you buy stuff from the home team, you get a special discount that you don’t get if you buy it from anybody else.

Many who’ve been watching the case closely think the court will reject that argument, and allow states to continue offering discounts for in-state bonds.

A decision is expected early next year.

In Washington, I’m Jeremy Hobson for Marketplace.