Reps. Randy Hultgren (R-IL) and Dutch Ruppersberger (D-MD) are urging the House Ways and Means Committee to reject any tax reform proposal that caps or eliminates the deduction on tax-exempt municipal bonds.
In a letter to Committee Chair Kevin Brady (R-TX) and Ranking Member Richard Neal (D-MA), Hultgren and Ruppersberger said nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds. Previously submitted tax reform proposals have either limited the value of tax benefits for municipal bonds, or eliminated the tax exemption on municipal bond interest altogether.
The bipartisan letter was signed by 156 members of Congress –
95 Democrats and 61 Republicans.
“Municipal bonds are a lifeline to local communities looking to expand a hospital or repair their infrastructure,” Hultgren, who
co-chairs the Congressional Municipal Finance Caucus with Ruppersberger, said. “These tools of ‘fiscal federalism’ allow municipalities to raise their own funds tax-free, using their own expertise and avoiding the heavy bureaucracy of the federal government. We should preserve this Main Street financing tool for municipalities intimately connected to the needs of their communities.”
Ruppersberger, a former county councilman, county executive and president of the Maryland Association of Counties, said tax-exempt bonds are among the most efficient ways to fund infrastructure projects that have created hundreds of thousands of jobs.
“If the federal income tax exemption is eliminated or limited, states and localities will pay more to finance projects, leading to less infrastructure investment and fewer jobs,” Ruppersberger said. “Worse, they will be forced to shift costs to their main revenue source – property taxes – hitting the already-suffering real estate market and the wallets of American homeowners.”
In 2015, more than $400 billion in municipal bonds were issued to finance infrastructure projects in the United States. Municipal bonds have funded more than $1.9 trillion worth of infrastructure construction, including schools, hospitals, airports, affordable housing, water and sewer facilities, public power utilities as well as roads and public transit.