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NCSHA Urges Congressional Leaders to Maintain Tax Exemption for Municipal Bonds

Published on April 2, 2015 by Greg Zagorski
NCSHA Urges Congressional Leaders to Maintain Tax Exemption for Municipal Bonds

Last week, NCSHA joined 50 other organizations in sending a letter to leaders of both the U.S. House of Representatives and the U.S. Senate urging them to oppose eliminating or diminishing the tax-exempt status of municipal bonds. The letter was spearheaded by the Don’t Mess with our Bonds Coalition, a coalition comprised of state and local government associations, including NCSHA, which is dedicated to protecting the tax-exemption for municipal bonds, including private activity bonds. The signatories comprise a broad array of governmental and private stakeholders.

The letters, which are nearly identical, point out that municipal bonds are state and local governments’ best option for financing a number of critical investments, including affordable housing. Further, the letters note, municipal bonds have a strong track record of success, having financed the vast majority of state and local governments’ infrastructure needs for nearly 100 years.

If the tax exemption for municipal bonds were to be eliminated or reduced, the letters state, it would substantially increase borrowing costs for state and local governments. The letters cite an estimate that the tax-exemption for municipal interest lowers state and local governments’ borrowing costs by 2 percent. The letters also estimate that capping the tax-exemption for municipal bonds at 28 percent, which President Obama and some in Congress have proposed, would have cost state and local governments $173 billion between 2002 and 2012. Eliminating the exemption outright would have increased costs by over $495 billion during that same time period.

Leaders of both the Senate Finance Committee and the House Ways and Means Committee have indicated that they are exploring options for reforming the federal tax system this Congress. As these efforts continue, NCSHA will continue to meet with lawmakers to educate them about the importance of maintaining the tax exemption for Housing Bonds. These letters are part of those wider efforts.