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Do not change tax treatment of municipal bonds, APPA, others tell Obama, Boehner


From the December 21, 2012 issue of Public Power Daily

Originally published December 21, 2012

By Jeannine Anderson
Editor

APPA joined the National Governors Association, National League of Cities, Large Public Power Council and more than a dozen other groups yesterday in a letter to President Barack Obama and House Speaker John Boehner, R-Ohio, asking them not to alter the federal income tax treatment of municipal bonds in their "fiscal cliff" negotiations.

Both Speaker Boehner and President Obama have suggested capping the tax value of itemized deductions and exclusions at 28 percent, including the exclusion for municipal bond interest. (See the Dec. 20 Public Power Daily.)

APPA and the others said they are willing to discuss infrastructure financing in the context of a debate next year on comprehensive tax reform. However, any changes to the traditional tax-exempt treatment of bonds would increase borrowing costs for state and local governments, which would hurt infrastructure investment and would cost taxpayers and ratepayers billions of dollars in higher interest costs each year, they said.

Among the other organizations signing the Dec. 20 letter were the National Association of Counties; U.S. Conference of Mayors; Government Finance Officers Association; National Association of State Auditors, Comptrollers and Treasurers; Council of Infrastructure Financing Authorities; and National School Board Association.

The Municipal Bonds for America coalition sent a similar letter yesterday to Speaker Boehner and to the majority and minority leaders of the House and Senate, warning of the negative consequences of limiting the tax value of municipal bonds.

"The threat of such a cap has, in recent days, been a factor in causing municipal bonds to become more expensive from the perspective of state and local government issuers, with yields rising sharply," the group said.

APPA opposes repealing or altering the current tax-exempt status of municipal bonds. The association is encouraging public power utilities and locally elected officials to contact their members of Congress to explain how proposals to cap exemptions at 28 percent would hurt their ability to get the financing needed to build infrastructure.

More information about APPA's efforts to preserve the tax-exempt status of municipal bonds, including letters of support from public power utilities and others, can be found on the APPA website.

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