Two senators have introduced a bill mirroring legislation pending in the House that would increase demand for municipal bonds by easing restrictions on the ability of banks to purchase them.

The bill, which was introduced Thursday, by Senate Finance Committee members Jeff Bingaman, D-N.M., and Mike Crapo, R-Idaho, would allow banks to deduct 80% of the cost of buying and carrying tax-exempt bonds issued by states, counties, and local governments whose annual bond issuance is $30 million or less. The $30 million limit would be considerably higher than the $10 million annual issuance limit under current tax law, and would be pegged to inflation.

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