More than 50 state and local groups representing housing, transportation and infrastructure sectors of the municipal bond market sent a letter to Senate leaders Wednesday urging them to maintain the status of tax-exempt bonds.
The coalition, led by the National League of Cities, the U.S. Conference of Mayors and the National Association of Counties among others, wrote Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., about their concerns for the future treatment of muni bonds as part of any upcoming tax reform efforts.
“The current Senate Budget Resolution suggests the possibility of a cap being placed on tax expenditures — which could include the exemption for interest earned on municipal bonds,” the groups wrote.
The Senate is expected to debate Senate Budget Committee chairman Patty Murray’s, D-Wash., fiscal 2014 budget by the end of this week. The Senate also has to tackle the 2013 stop-gap spending bill to keep the government funded through the end of the fiscal year, which ends on September 30. The current continuing resolution expires on March 27.
“As you consider the fiscal year 2014 concurrent budget resolution, we urge you to make clear that any comprehensive tax reform does not eliminate or cap the current tax-exempt deduction of municipal bond interest,” they said.
The letter emphasizes that muni bonds are the main financing tool for public infrastructure needs including highways, bridges, local streets, airports and schools. In 2012, more than 6,600 municipal bonds financed approximately $179 billion of infrastructure projects.
The groups said that eliminating tax exemption for municipal bonds or including it as part of any cap would increase the borrowing costs that public entities will have to pay for infrastructure improvements.
“The effect will be increased costs to the public for infrastructure and therefore less funding for teachers, fire and police officers, hospital workers, librarians and construction and maintenance workers,” the letter said.
The letter comes one day after the American Society of Civil Engineers issued their 2013 report card on the nation’s infrastructure. The group gave the U.S. an overall grade of a D+, slightly higher than the D in their report card in 2009.
The wide range of groups that signed onto the letter also included unions, construction-related groups such as the American Concrete Pressure Pipe Association and the Portland Cement Association, and others, including the American Sport Fishing Association, National Latino Farmers and Ranchers Trade Association, and The National Grange. In addition, environmental groups, such as the Chesapeake Bay foundation of Food and Water Watch, signed the letter.
