Municipal Bonds Update
President Obama’s fiscal year 2014 budget proposal recommends capping the tax-exemption of municipal bonds at 28 percent. The federal General Accounting Office recommended eliminating tax-exempt status all together.
For the past 100 years, the federal government has never taxed the interest earned on bonds issued by local governments. These tax-exempt bonds, used to fund local infrastructure projects such as roads, bridges, police stations, and water treatment facilities, create jobs and drive the Texas economy. Eliminating the tax-exemption on municipal bonds would increase borrowing costs and make it more difficult for cities to provide vital repairs and improvements to infrastructure. Tax-exempt bonds should not be replaced and should be excluded from any cap on tax deductions.
Capping or eliminating the deduction on municipal bonds is not a smart solution to the country’s economic and fiscal challenges. City officials should contact their members of congress to express concerns with such proposals. For more detailed information from the National League of Cities, which has worked diligently to protect cities on this issue, go to:
Click here to view a sample of letters sent by the League to the Texas congressional delegation.