Letter to Urge House Leaders to Back Tax-Exemption

WASHINGTON - Two House members are circulating a letter for colleagues to sign that will urge House Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif., to support tax-exemption for municipal bonds.

Reps. Dutch Ruppersberger, D-Md., and Randy Hultgren, R-Ill., are the key authors of the letter, which raises concerns with President Obama's proposal, in his fiscal 2016 budget request, to cap the value of the muni exemption at 28%.

"Eliminating or capping the current deduction on municipal bonds would severely curtail state and local governments ' ability to invest in themselves," the letter states. "It would increase borrowing costs to public entities and shift costs to local residents through tax or rate increases."

The letter, which is similar to one the two House members authored and sent in 2013, also urges Boehner and Pelosi to reject proposals to change the tax-exempt status of munis during discussions of budget proposals and tax reform. "While we agree that we must reduce government spending and our country's unsustainable debt, we should not be eliminating a vital tool for job growth and economic development," it states.

The letter notes that munis have been tax-exempt for more than 100 years and are the main method by which state and local governments finance infrastructure.

A spokesperson for Hultgren could not provide signatories for the new letter yet or say when it will be sent. The goal is for as many Congress members as possible to sign the letter, including those who signed the 2013 letter as well as others.

In a "Dear Colleague letter" dated Friday, Ruppersberger and Hultgren invited their colleagues to sign the letter to the House leadership. They noted that bonds have financed schools, hospitals, airports, water and sewer lines, utilities, roads and transit projects. "These projects aren't optional for the communities they serve, and neither is our obligation to protect the tax-free status of the bonds used to build them from attack," the Congressmen wrote.

Hultgren and Ruppersberger also argued that changing the muni exemption would not be a smart way to deal with economic challenges. "Several members of the [House] Ways and Means Committee who have served in local elected office - and understand the importance of these bonds as financing tools -… testified that these misguided proposals would unfairly shift construction costs to local residents through tax increases or simply leave our police officers, firefighters, hospital workers, librarians, teachers and schoolchildren with aging, deteriorating and often dangerous facilities to work and learn in," the two House members told their colleagues.

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