House Ways and Means Committee Holds Hearing on Muni Tax ExemptionOn March 19, 2013, the House Ways and Means Committee held a hearing on federal tax reform and tax provisions affecting state and local governments. While no state or local government elected witnesses were invited to testify, David Parkhurst, Director of the National Governors Association’s Economic Development and Commerce Committee, served as a witness on the panel. Parkhurst was joined by long-time former House Ways and Means Committee tax counselor and current Georgetown University Law School professor John Buckley, Tax Foundation President Scott Hodge, and former Executive Director of the Municipal Securities Rulemaking Board Christopher Taylor. The prepared testimony of each of these witnesses is available here.
The hearing focused on the state and local tax deduction, the tax exemption on municipal bond interest, and private activity bonds, but also included some discussion of tax credit and tax subsidy bonds. Committee members questioned panelists on the need to maintain federal support for these tax provisions in the context of the House’s effort to organize comprehensive federal tax reform legislation, and Parkhurst and Buckley explained the great need to maintain the state and local tax deduction and the municipal tax exemption. And while a number of Republican and Democratic committee members agreed with this conclusion, several members did question what the actual impacts would be on national infrastructure development, the municipal bond market, and investors, should the exemption be reduced or repealed.
The GFOA’s Federal Liaison Center conducted a significant amount of advocacy in the days leading up to the hearing, meeting with committee staff and urging them to maintain the exemption, as well as sharing with them the February 27, 2013, report issued by the National Association of Counties, U.S. Conference of Mayors, National League of Cities, and the GFOA, detailing the effectiveness of the exemption and the impact of the loss of this important financing tool.
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