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ACTION NEEDED: Urge Your Representative to Sign Letter Protecting Tax-Exempt Municipal Bonds

May 30, 2013
A letter is being circulated among members of the House by Reps. Ruppersberger (R-Md.) and Hultgren (R-Ill.) that expresses concern over proposals to tax or partially tax municipal bond interest. The letter requests that leadership not pursue these policy proposals. AGC members are asked to write to their member of Congress asking them to sign on and protect this important infrastructure finance tool. Under the federal tax code, investors do not pay federal income tax on interest earned from most bonds issued by state and local governments. This tax exemption allows state and local governments to pay a lower interest rate on their borrowing than they would if their interest payments were taxable to investors. In the FY 2014 Budget, President Obama proposed partially taxing the interest income from municipal bonds.  If this proposal had been in effect during the last decade, it is estimated that this would have cost states and localities an additional $173 billion in interest expense for infrastructure projects financed over the past ten-year period. A recent report by the National Association of Counties, National League of Cities, and U.S. Conference of Mayors concludes that tax-exempt municipal bonds are the most important tool in the U.S. for financing investment in schools, roads, water and sewer systems, airports, bridges and other vital infrastructure. State and local governments financed more than $1.65 trillion of infrastructure investment over the last decade (2003–2012) through the tax-exempt bond market. In 2012 alone, more than 6,600 tax-exempt municipal bond issuances financed over $179 billion worth of infrastructure projects. In typical market conditions, the tax exemption can save states and localities up to two percentage points on their borrowing rates. In addition to the additional cost of $173 billion from the Obama proposal, if the proposals for a complete removal of the tax-exempt status had been in place during the nine-year period, it is estimated that the $1.65 trillion of state and local infrastructure investment would have cost governments an additional $495 billion of interest expense. Ask your member of Congress to preserve the tax-exempt status for municipal bonds. For more information, please contact Scott Berry at (703) 837-5321 or berrys@agc.org
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