WASHINGTON — The nation's governors support maintaining the tax exemption for municipal bonds, though tax reform appears to be unlikely this year, leaders of the National Governors Association said Wednesday.
NGA chair and Oklahoma Gov. Mary Fallin and NGA vice chair and Colorado Gov. John Hickenlooper discussed keeping the exemption and other priorities in the NGA's second-annual State of the States Address.
The NGA created a tax reform task force last year, and its recommendations included preserving the tax exemption for munis.
"For more than a century, municipal bonds have been used to build this country. Roads, schools hospitals and airports have all been built thanks to the unique status of municipal bonds," Hickenlooper said, adding that "if infrastructure is a priority for the nation, and it has to be a priority, the tax-exempt status of municipal bonds must be preserved."
Another key recommendation from the task force is to maintain the deductibility of state and local taxes from federal income tax.
The governors recognize the need to simplify and improve the federal tax code, but Fallin told reporters after the speech that tax reform looks unlikely in 2014. She added that many states are undertaking their own tax reform efforts this year.
With partisan gridlock leading to congressional inaction, states have been pursuing their own policies.
"Our message for 2014 is clear: states are leading, and we encourage our federal partners to work more closely with us, and to take note and to use the policy ideas coming from their state partners," Fallin said. "And above all, please do not get in our way. Let the states work to solve problems and be your partner."
Toward the beginning of the speech, Fallin outlined the NGA's efforts last year on a variety of issues where legislative action is needed. But despite their efforts, "here we stand today with essentially the same to-do list sitting before our Congress," she said.
The governors hope to avoid having the same agenda again in 2015.
"We want to move our nation forward by putting people back to work, by supporting growth, by educating our children and by improving our security," Hickenlooper said.
The NGA wants to see Congress pass a long-term surface transportation reauthorization bill. On Tuesday, Fallin testified before the House Transportation and Infrastructure Committee on the matter.
"Her message was that uncertainty over infrastructure at the national level forces states to act to fill the void," Hickenlooper said.
Governors have created new approaches for meeting their infrastructure needs, including identifying opportunities for new revenue sources and using public-private partnerships. Several governors, including Hickenlooper, are participating in a new NGA effort to help states examine how they can use innovative financing strategies for infrastructure, the Colorado governor said.
However, "governors agree that state action is not an invitation for federal disengagement or devolution. Infrastructure requires an intergovernmental partnership," Hickenlooper said.
The governors are pleased that both the House and the Senate have passed water infrastructure bills, and now want Congress to reconcile the differences between the bills and send legislation to the president for his signature.
Another issue where the NGA wants to see congressional movement is with the Marketplace Fairness Act, which would allow states to compel out-of-state online retailers to collect sales taxes. The Senate has already passed the bill, and now it's the House's turn, Hickenlooper said.
Consumers bought more than $500 billion worth of online goods during the past holiday season, Hickenlooper said. "Marketplace Fairness is just common-sense legislation that upholds the principles of federalism and is fair, simple and good for business," he said.
