WASHINGTON — The Democrats’ 2012 platform doesn’t contain the tax proposals the Obama administration released earlier this year that rattled the municipal bond market, but it does call for higher taxes on the wealthy that would boost demand for tax-exempt debt.
The platform, scheduled to be approved at the party’s national convention in Charlotte, N.C., on Tuesday, also pushes for increased investment in infrastructure.
It would extend tax cuts that are set to expire for the 98% of American families who make less than $250,000 and promises not to raise taxes on them.
“We are committed to defeating efforts that would return us to the failed economic policies of the past, in which tax relief for the wealthy explodes the deficit and asks the middle class to shoulder that burden,” the platform says.
Muni market participants have said that such a plan would make municipal bonds more attractive to taxpayers making more than $250,000. The 35% top marginal tax bracket would increase to 39.6%, and leave many investors seeking alternative investments, such as tax-exempt muni bonds.
The Democrats also support “reforming our tax code so that it is fairer and simpler” and want a platform that lives up to the so-called Buffett Rule. That proposal, introduced as a bill by Senate Democrats and proposed by President Obama in his State of the Union Address, would impose a minimum 30% tax rate on taxpayers whose adjusted gross income exceeds $1 million, including capital gains and dividends.
Imposing the 30% tax rate could make munis more attractive to investors subject to the higher tax rate and give them a relative advantage compared to other forms of investment, market participants have said.
However, the platform doesn’t detail how Democrats would close tax loopholes or how they would make wealthy Americans pay their fair share. It also doesn’t mention an administration proposal introduced in the president’s 2013 budget that would place a 28% cap on the value of tax-exempt interest for the wealthy.
By contrast, the Republican platform approved last week at the party’s national convention in Tampa, Fla., contained several detailed tax plans including extending the 2001 and 2003 Bush tax cuts and reducing marginal tax rates across the board by 20%. It would also repeal the estate tax and the alternative minimum tax.
“We see an America with greater economic security and opportunity, driven by education, energy, innovation and infrastructure, and a tax code that helps create American jobs and bring down the debt in a balanced way,” the platform says.
The platform calls for a renewal of the spirit of Obama’s six-year, $476 billion infrastructure budget proposal, which would seek to substantially increase infrastructure investment with savings from the winding down of the wars in Iraq and Afghanistan. The Republican platform specifically endorsed further privatization of public facilities and increased reliance on public-private partnerships to finance such projects, while the Democrats’ platform contains language supporting reforms that will “better leverage government dollars.”
“We will continue to partner with local communities to support their sustainable development,” the platform states.