Cantwell presses Lew on proposal to cap municipal bond tax deduction
Originally published February 15, 2013
Senator Maria Cantwell, D-Wash., pressed Treasury Secretary nominee Jack Lew on the effect of President Obama’s proposed surtax, or "cap," on bond interest. "I just don't understand the administration's idea of capping the municipal bond tax deduction ... if we want to encourage more investment," Cantwell said at a Feb. 13 Finance Committee confirmation hearing. "I’m curious as to whether you’re going to continue that policy." Lew was testifying before the Finance Committee in support of his nomination to serve as treasury secretary.
The proposed 28 percent cap–which would apply to all itemized deductions and most major income exclusions, including municipal bond interest–was intended to generate revenue and increase equity in the income tax code, Lew said. He said the proposal was intended as a placeholder for tax reform or a "fallback" should Congress fail to enact tax reform legislation. The cap wasn’t "specifically directed at municipal bonds or at other specific areas of tax activity," he said.
Still, Lew continued to defend the proposal: "I would say as a general proposition that the hard decisions in tax reform will, in many cases, put us in places where there are things that we are ... sympathetic to ... [that] we have to curtail."
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