Fourteen Democrats in the Senate are strongly urging President Obama not to cap or eliminate tax exemption for municipal bonds, warding it would have a negative impact on both federal and local budgets and ultimately be “inappropriate and shortsighted.”

“While we recognize the challenges our nation faces as we work to bring order to our fiscal house, we believe strongly that balancing the federal deficit by shifting the burden to local governments would have, ironically, a substantial negative impact on our federal budget outlook through decreased federal tax receipts as a result of diminished economic activity,” the Senators wrote in a one-page letter sent to Obama earlier this week. “We respectfully encourage you to consider other options as you work with Congress to find the savings that we all acknowledge we must find.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.