Without a tax exemption for municipal bonds, Maryland’s state and local governments would face greatly increased costs for these essential investments.  NACo’s estimate is some $5.8 billion in additional interest costs from the last decade alone.  These shifted costs to counties would fall primarily upon their main general revenue source — the property tax.  This would further burden an already struggling real estate market, and impose among the most regressive and unpopular tax schemes onto taxpayers.

Now NACo provides the following Legislative Update:

• Click here for an updated NACo legislative presentation on municipal bonds and tax reform efforts.  This presentation provides an overview of the many moving parts of tax reform efforts involving municipal bonds in both the U.S. Senate and U.S. House of Representatives.

Action Needed

URGE YOUR HOUSE REPRESENTATIVES to sign onto the letter to House Leadership urging them to preserve the tax-exemption for municipal bonds.  Click here to read the letter.

If your Members would like to sign on, have their staff contact either Ammon Simon in Rep. Hultgren’s office (Ammon.Simon@mail.house.gov or 202.225.2976) or Walter Gonzales in Rep. Ruppersberger’s office (walter.gonzales@mail.house.gov or 202.225.3061).

• Click here for a list of Maryland’s Representatives

Background

As tax reform discussions resume in the 114th Congress, proposals that would cap certain tax benefits, including the exemption for municipal bond interest, continue to be offered as a way to help address the federal debt and deficit.  Some of these proposals include:

• President’s FY2016 Budget Proposal: Reiterates 28 percent cap on the value of certain tax benefits, including interest earned on new and outstanding state and local tax exempt bonds
• 2014 Comprehensive Reform Discussion Draft: Among a host of significant changes to provisions important to state and local governments, the draft released by former House Ways and Means Chairman, Dave Camp (R-MI), would place a 10 percent surtax on tax-exempt interest for high income taxpayers ($400,000 for single filers, $450,000 for married filers)
• Senate FY2014 Budget Resolution: Suggested the possibility of a cap being placed on tax expenditures, which could include interest earned on municipal bonds
• 2010 Simpson-Bowles Commission: Proposed elimination of all income tax expenditures; interest earned on state and local municipal bonds would be fully taxable for newly-issued tax exempt municipal bonds

Tax-exempt municipal bonds have been a fundamental feature of the United States tax code since 1913. They remain the primary method used by states and local governments to finance public capital improvements and public infrastructure projects that are essential to creating jobs, sustaining economic growth and improving the quality of life for Americans in every corner of this country.

Between 2003 and 2012, counties, states and other localities invested $3.2 trillion in infrastructure through long-term tax-exempt municipal bonds, 2.5 times more than the federal investment. During that decade, $514 billion of primary and secondary schools were built with financing from tax exempt bonds; nearly $288 billion of financing went to general acute-care hospitals; nearly $258 billion to water and sewer facilities; nearly $178 billion to roads, highways, and streets; nearly $147 billion to public power projects; and $105.6 billion to mass transit.

Resources

• NACo presentation on municipal bonds with charts and infographics
• NACo legislative fact sheet on municipal bonds
• NACo Research Report: Municipal Bonds Build America
• NACo/USCM/NLC report on the impact of municipal bonds
• NACo state-by-state municipal bond analysis

If you have questions or need assistance, contact Mike Belarmino at mbelarmino@naco.org or 202.942.4254