Report Details Tax Exemption Elimination and Cap ImpactsOn February 27, 2013, GFOA President-Elect Tim Firestine participated in a press conference with the leadership of the U.S. Conference of Mayors, National Association of Counties, and National League of Cities to announce a new report – a joint effort by the four groups – that details the importance of maintaining the tax-exempt status of municipal bonds.
The report provides data on how state and local governments would be affected, should federal proposals to repeal or cap the exemption be enacted, and points out that in the last decade, state and local governments financed more than $1.65 trillion of infrastructure investment using tax-exempt bonds. Nearly all were in just six categories: primary and secondary schools ($514 billion); hospitals ($288 billion); water and sewer facilities ($258 billion); roads, highways, and streets ($178 billion); public power projects ($147 billion); and mass transit ($106 billion).
If the municipal tax exemption had been in place over the last 10 years, state and local governments would have incurred more than $495 billion in additional interest costs, the report states. If the proposed 28 percent cap on the municipal tax exemption had been in effect during that time, state and local borrowing costs for the bonds issued over that period would have increased by $173 billion. In 2012 alone, more than 6,600 tax-exempt municipal bonds financed more than $179 billion in infrastructure projects, the bulk of which were primary and secondary education, water and sewer facilities, and hospitals.
Click here for the report.