WASHINGTON — President Obama’s jobs bill proposal to cap tax-exempt interest for higher-income taxpayers surprised muni bond market participants and was seen as a betrayal by some issuers who, according to one analyst, could have to pay about $10 billion more in added interest costs over the life of their muni bonds if the proposal is enacted.

While most market participants don’t think the American Jobs Act stands a chance of approval by Congress, several tax experts warned that the cap on tax-exempt interest is ominous sign for future debates on deficit reduction and tax reform because it’s now on the table for discussion and would have to be part of any proposal to cut income tax rates.

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