Bonds and Financing

More than 100 lawmakers tout value of tax-exempt municipal bonds

Any proposal to eliminate or reduce the value of tax exemption on municipal bonds would raise borrowing costs for state and local governments, lower infrastructure investment and stall or threaten job creation, more than 100 House members said in a May 13 letter to House Ways and Means Committee Chairman Richard Neal, D-Mass., and Ranking Member Kevin Brady, R-Texas.

House Municipal Finance Caucus Chairman Dutch Ruppersberger, D-Md., and Steve Stivers, R-Ohio, were joined by 109 House members in the letter that was sent to Neal and Brady.

“Nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds,” the letter noted. “In 2018 alone, more than $325 billion in municipal bonds were issued to finance the projects that touch the daily lives of every American citizen and business.”

The House members said that a combination of local control and local responsibility makes municipal bonds an effective tool and an expression of fiscal federalism. The letter points out that voters throughout the U.S. overwhelmingly support tax-exempt municipal bonds.

“The federal tax exemption reduces the cost of issuing municipal bonds, making important community infrastructure cheaper for taxpayers and freeing up resources for other needs,” the House members went on to say. “Should this tax exemption be preserved, it is estimated that municipal bonds will finance another $3 trillion in new infrastructure investments by 2028.”

The Ways and Means Committee should “carefully consider the impact of any changes to the tax status of municipal bonds.”

The American Public Power Association’s members in late February approved several new policy resolutions including one that highlighted the Association’s push for certain improvements to tax exempt financing.

In the resolution, the Association urged Congress to improve tax-exempt municipal bonds. Among other things, the Association would like to see the reinstatement of tax-exempt advance refunding bonds.

More recently, in March the Association submitted a statement for the record to the House Ways and Means Committee as a follow up to a hearing on infrastructure in which the Association urged lawmakers to consider modernizing the tax treatment of municipal bonds.