A Governing magazine column discusses the major party presidential candidates’ proposed changes to tax systems, and what they might mean to state and local governments:
So when a new president comes into office in January, how might campaign tax reform promises affect the ability of states and local governments to make critical investments?
Apart from the muni tax exemption — which helps states and localities to borrow money for infrastructure — eliminating the deduction for state and local taxes is one campaign promise that could most directly impact those governments. It would mean that Americans pay federal taxes on their state and local taxes. So it is that presidential candidate Hillary Clinton proposed limits on high earners’ deductions, and candidate Donald Trump said he would cap the value of individual deductions. He also promised to “reduce or eliminate some corporate loopholes” and cap the deductibility of business interest expense.
The target of their proposed changes involve deductions that currently serve to ensure the federal government does not, in effect, impose federal taxes on state property and sales and use taxes. If implemented, they would undo and reverse important provisions in our federal tax code.
For earlier coverage of the long-standing municipal bonds issue, see Conduit Street coverage.