The National Governors Association released a set of federal tax reform principles Wednesday that make preserving tax-exempt financing a top priority.
“The preservation of public financing — notably tax-exempt financing — is necessary because it is the primary method for states to raise capital for a wide range of projects,” states one of public finance principles recently adopted by the NGA.
“Federal statutory and regulatory policies should neither increase bond issuance costs to states and local governments, directly or indirectly, nor diminish retail and institutional investor demand for bonds issued by states and local governments,” stated another one of the group’s public finance principles.
“Tax reform is a crosscutting issue with broad policy and revenue impacts for states,” Pennsylvania Gov. Tom Corbett, said in a release. Corbett is a co-chair of NGA’s recently formed tax reform task force that has been tasked with developing tax reform proposals “that are consistent with the intertwined interests of states and the federal government.”
“A key issue for states is safeguarding public finance — notably with tax-exempt bonds — because it is the primary method to finance infrastructure projects that create jobs and help grow the economy,” said Corbett, who also chairs NGA’s economic development committee.
Other NGA principles stated that federal tax reforms should not shift costs to states or impose unfunded mandates on them and should provide states with the flexibility to create efficiencies and stimulate economic growth.
The governors also said tax reforms should result in simplicity and produce savings for federal and state governments.
They said federal and state governments should work together to determine whether the policy benefits of specific federal tax expenditures exceed budgetary costs before making final decisions to avoid unintended consequences.
Another NGA principle is that no federal law or rule should preempt, limit, or interfere with the constitutional or statutory rights of states to develop and operate their revenue and tax systems.
“Decisions at the federal level have consequences for states. Therefore no fundamental tax reform can succeed without an intergovernmental effort,” said Kentucky Gov. Steve Beshear, the other co-chair of the tax reform task force and vice chair of NGA’s economic development committee.
“Taxpayer fairness, deficit reduction and tax expenditures are all driving factors in tax reform, but we also need to protect our ability to innovate because what we’re doing at the state level on tax reform can help drive what happens at the national level,” he said.
Other tax reform task force members are: Connecticut Gov. Dan Mallloy, Michigan Gov. Rick Snyder, and Virgin Islands Gov. John deJongh, Jr.. All of them are economic development committee members.