ANCHORAGE — Threats to eliminate or curtail tax-exemption is a top concern for state treasurers and they plan to closely monitor proposals as a new Congress and White House are elected in the coming months.
In an interview with The Bond Buyer at their annual conference here, National Association of State Treasurers president Nevada Treasurer Kate Marshall said that if municipal bonds are taxed, the cost of infrastructure financing will skyrocket at a time when the country is in dire need of upgrades to roads, bridges, schools and sewer systems.
“If you are going to tax those bonds, while ... it may look like you are collecting revenue from wealthy people and entities who purchase bonds, in fact what you are doing is simply transferring revenue from states and municipalities to the federal government,” Marshall said. “So it’s a transfer from one part of the public sector to the other.”
In March, one month after President Obama proposed a 28% cap on the value of tax-exemption for the wealthy in his fiscal 2013 budget, three top officers from NAST met with White House officials for a 90-minute meeting to discuss that and other muni bond proposals.
“We were honored that the White House immediately brought in their top people on that issue to sit down with us with no time limit and have a substantive discussion,” Marshall said.
“We highlighted that tax-credit bonds don’t work for state governments” and that there is a difference between them and tax-exempt municipal bonds, said Virginia Treasurer and NAST president-elect Manju Ganeriwala, who was also interviewed. She said the administration officials were appreciative that the group brought tax-exemption to their attention.
Eliminating or curtailing tax-exemption would be “detrimental” to states, Ganeriwala said. During the sluggish recovery, tax-exemption has not only helped states keep financing costs low for basic core infrastructure needs, it has also provided jobs in the construction industry, she said.
White House officials told NAST they would take their concerns into account as they consider tax reform. Ganeriwala said NAST will wait until after the November election to reconnect with the White House staff and resume conversations.
Earlier this year NAST adopted a resolution on the taxing of municipal bonds and was one of 17 state and local groups that sent a letter to the chairs of the Senate Finance Committee and House Ways and Means Committee expressing their concern about Obama’s inclusion of the 28% cap proposal in his budget.
Separately, in her president’s report at the annual business meeting, Marshall applauded the group for coming together and coalescing around the muni bond resolution, “if only because in the rest of the country there is an absence of this ability to come together when it comes to financial issues,” she said.
Marshall also highlighted the group’s bipartisan op-ed published earlier this year that outlined their opposition to the regulatory changes for money market mutual funds that were floated by Securities and Exchange Commission chairman Mary Schapiro, which included moving to a floating net-asset value.
Marshall said she has had three goals as president: improve NAST’s business model, raise its national profile and reduce partisanship. The op-ed on the money market mutual funds and the resolution on tax-exemption were examples of dissipating partisanship within NAST, she said.
“That’s because of you guys and realizing we have common goals,” she said. “I don’t think that is a concern anymore. I don’t hear that underground current anymore.”
In the past year NAST has finally begun the process of becoming a player on the national level, Marshall said, adding that hiring two new full-time staff members will help the group’s outreach and lobbying efforts.
Ganeriwala, who was elected unanimously on Monday to serve as the 2013 president, said that she too wants to raise the profile of NAST when weighing in on issues that affect treasurers.
She said she hopes NAST becomes “an organization where congressional leaders and administration members and other regulatory entities come and approach us, seek us out for our comment. To do that we have to make sure that we are vocal and not sit on the sidelines when issues come up — that we quickly act together and take a position. “
Ganeriwala anticipates she will spend most of her time working with the NAST executive committee and membership to define the group’s positions on relevant issues. “I think as an organization in the past we have struggled to take positions on issues,” she said. “Sometimes we have internal differences that keep us from coming out quickly.”
“It’s a tremendous honor and privilege to be elected by your peers,” Ganeriwala added. “I feel the weight on my shoulders to represent the association well.”