Any reforms made to the tax-exemption of municipal bonds should be "careful and deliberative, particularly in how they treat previously-issued debt," a report from the Committee for a Responsible Federal Budget warned.

But the group also noted that tax reform could allow the federal government to make subsidies to public investments more efficient and to make gradual changes to subsidies that are undesirable. Tax reform also could generate revenue that could be used to reduce tax rates and the deficit, it said.

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