Reps. Randy Hultgren (D-IL) and C.A. "Dutch" Ruppersberger (D-MD) recently forwarded a bipartisan letter to House leadership in support of municipal finance, a tool that helps local and state governments when financing new schools, hospitals, fire stations and roads.
The letter specifically asks leadership to reject proposals to cap or eliminate the deduction or tax deduction on tax-exempt municipal bonds used to finance infrastructure projects.
“For more than a century, municipal bonds have enjoyed tax-exempt status and have been the primary method by which state governments and local municipalities finance public capital improvements and infrastructure construction,” the letter reads. “These projects are engines of job creation and economic growth, and it is imperative that their tax-exempt status remain unchanged. Eliminating or capping the current deduction on municipal bonds would severely curtail state and local governments’ ability to invest in themselves. It would increase borrowing costs to public entities and shift costs to local residents through tax or rate increases."
President Barack Obama in his 2015 budget proposal suggested limiting the value of tax benefits for top earning investors in municipal bonds to 28 percent, a reduction from the current 35 percent.