NLC Submits Tax Reform Recommendations to Senate Finance Committee

The National League of Cities (NLC) was recently invited by Senator Michael Bennett (D-Colo.) to serve on the Infrastructure, Community Development and Energy working group established by the Senate Finance Committee as it begins to examine the federal tax code. At the first meeting of the working group, NLC had the privilege of providing the perspective of local officials, re-emphasizing the importance of tax-exempt municipal bonds as the preeminent financial tool for building infrastructure. 

Together with the National Association of Counties, the United States Conference of Mayors, and the Government Finance Officers Association, NLC submitted a comment letter to Chairman Orrin Hatch, Ranking Member Ron Wyden, and task force leaders Senator Dean Heller (R-Nev.) and Senator Bennett. NLC urged the Senate Finance Committee to be mindful of three specific areas as they began their work on tax reformation: (1) maintaining the federal tax exemption on municipal bonds to promote job creation and improve the nation's infrastructure; (2) ensuring that state and local governments retain the authority to set their own tax policy; and (3) opposing federal pre-emptions that would grant preferential tax treatment to certain industries and threaten the fiscal health of state and local governments.

NLC reminded the committee that, for more than a century, tax-exempt municipal bonds have been the primary tool for state and local governments to finance the public infrastructure that supports everyday life. These bonds are used to finance a multitude of projects, including schools, hospitals, bridges, water treatment facilities, libraries and many other public projects. Far from being a "loophole," the exemption is instead a fundamental component of the federal, state and local partnership and of public-private partnerships. More than two-thirds of all public infrastructure projects in the United States are financed by municipal bonds, allowing local governments to save approximately two percent on their borrowing costs. This translates to substantial savings for local taxpayers.

The letter closes by reminding the Senate Finance Committee that, when considering any changes to the federal tax code, it is important to respect local authority and promote intergovernmental partnership by authorizing the collection of local taxes already owed to state and local governments on Internet and mail-order sales. Accordingly, NLC calls on Congress to immediately pass the Marketplace Fairness Act (S 698).

Click here to read the letter submitted by NLC to the Senate Finance Committee. For more information, please contact Priya Ghosh Ahola, Esq., Principal Associate of Federal Advocacy, at (202) 626-3015 or ghosh@nlc.org.