Clyburn Wants Everything On the Table In Tax Reform

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WASHINGTON - House Assistant Democratic Leader Jim Clyburn, D-S.C., told congressional staff members Tuesday that everything should be on the table for a comprehensive tax-reform bill, while municipal bond market participants and lawmakers defended the tax exemption for munis.

The lawmakers and market participants spoke at the Municipal Bonds for America Coalition's "Municipal Bonds 101" seminar on Capitol Hill. The annual event is designed to educate congressional staffers about munis.

Clyburn said that when it comes to tax reform, "we need to have a comprehensive discussion."

While groups talk to members of Congress about topics that they view as the whole world, the members perceive those issues as "just a piece of it," he said.

Congress needs to do what is necessary to move the country forward and to improve the country's infrastructure, but "we have to do it in a fair and balanced way," Clyburn said.

Market participants who were panelists at the seminar said after the event that they don't want curbs to the muni exemption to be considered as part of tax reform.

Columbia, S.C. mayor and MBFA chairman Steve Benjamin said, "We certainly want this issue off the table." But he said he thinks Clyburn understands the muni issue because there is a lot of bond-financed infrastructure in his district, which includes Columbia. Clyburn said Benjamin keeps him "calibrated" on some issues, one of which is the muni exemption.

During the seminar, an audience member asked why members of Congress might consider eliminating the tax exemption. Market participants explained the reasons and then refuted them.

Benjamin said that some lawmakers think that wealthy people are the only ones that benefit from the exemption, "which couldn't be farther from the truth." He noted that many bonds are held by individuals over the age of 65.

Alan Polsky, senior vice president at Dougherty & Company, said he thinks there's a "misperception." Some members of Congress suggest it would be more efficient to deliver a subsidy to state and local governments through a tax credit or for municipalities to use the taxable market. However, small and infrequent issuers would have their access to the capital markets limited or eliminated if tax-exempt bonds were replaced with another type of bond. Taxable bonds like tax-credit bonds should be an alternative, not a substitute, for munis, he said.

Jane Campbell, director of the Washington office of the National Development Council and former mayor of Cleveland, said that Congress is trying to balance the federal budget, and the Joint Committee on Taxation scores the exemption as something that leads to a lot of revenue losses. The lawmakers may think that if a small tax is placed on muni interest "nobody will notice and it won't really be a problem," she said.

As a result, MFBA's goal "is to make it clear that people will notice," Campbell said.

Panelists mentioned that changes to the tax-exemption could lead to decreased investments in infrastructure and/or higher taxes and fees for taxpayers and ratepayers.

Raj Srinath, chief financial officer of the Santa Clara Valley Transportation Authority in California, said he looks at the best ways to finance infrastructure, and in almost all cases, "tax-exempt bonds wins the battle." Tax-exempt bonds are "cheap, reliable and a safe investment," he said.

Two House members who took the lead on bipartisan letters in support of munis also defended the exemption.

Rep. Dutch Ruppersberger, D-Md., said that if the tax-exemption were taken away, "it would hurt every single jurisdiction in this country."

Rep. Randy Hultgren, R-Ill., called on the congressional staff to "be vigilant" when it comes to munis, since sometimes provisions can be slipped into legislation at the last minute.

 

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