Muni Bond Tax Exemption Remains under Threat

September 16, 2013

By Lars Etzkorn

Returning from August recess, House Ways and Means Committee Chair Dave Camp (R-MI) continues to work on comprehensive tax reform by calling committee Republicans to a series of closed-door meetings to discuss tax reform.

Both Representative Camp and Senate Finance Committee Chair Max Baucus (D-MT), the two top tax reform advocates in Congress, want to rewrite the federal tax code using a blank slate approach, with all tax expenditures on the table.  Neither has stated publically whether they support preserving the tax exemption for municipal bonds.

In July, Senator Baucus and Representative Camp said they were committed to moving tax reform this year. 

Representative Camp’s commitment to releasing of a bill, however, has slipped to “by the end of the year,” not in September as he formerly announced.  Senator Baucus has also not released a bill, although in July he forewarned that,  “we will mark up a tax bill this fall, so I urge senators to be ready.”

Curtailing or eliminating the tax exemption of municipal bonds would raise costs for local governments and would result in less investment in infrastructure at a time when jobs are scarce and the physical state of public works is deteriorating. It will have a negative impact on local economies, and members of Congress need to hear that directly from their constituents.

NLC calls on local officials to take action to protect the bonds that cities rely on to finance infrastructure projects, create jobs and keep residents' taxes lower. NLC has developed an online municipal bonds interest calculator to show the cost increases a community would pay if the tax exemption is capped or eliminated. In addition to the calculator, NLC’s municipal bonds webpage includes ways for city leaders to lend their voice to this effort:

  1. Write a letter to Congress;
  2. Write an op-ed to feature in a local or regional paper;
  3. Hold a media event at a municipally-funded infrastructure project; and
  4. Pass a resolution.