Preserving the Tax Exemption—GFOA Grassroots

Thursday, November 17, 2016

Now that the general election has concluded, we enter the hectic and exciting period of a new administration laying out its key goals and potential partnerships with Congress. Although President-elect Trump has not made municipal bonds a centerpiece of their campaign messaging, GFOA will work with the new administration to ensure that any new infrastructure financing plans recognize the importance of this centuries-long partnership, and that the tax-exemption remains intact. Through the municipal bond tax-exemption, the federal government continues to provide support for the federal, state, and local partnership that cannot be practically replicated by other means.

This is an especially important time for GFOA members to engage their Congressional representation on preserving the tax exemption on municipal bond interest and state and local deductibility.

Municipal bonds are the most important tool in the United States for financing infrastructure; nearly 75% of all public infrastructure funding is derived from tax-exempt bonds. This form of financing is used by more than 50,000 state and local governments and authorities to satisfy a variety of critical infrastructure needs. State and local governments issue approximately 11,600 bonds a year, totaling approximately $300 billion a year, on average. This has allowed state and local governments to finance more than $3.5 trillion in infrastructure investment over the last decade through the capital markets.

As tax reform and infrastructure proposals are discussed, GFOA will consider the potential impact of any changes on critical infrastructure that residents in all states and local communities have come to depend on. Our country needs more infrastructure investment, not less, but federal decision making should not force states and local governments to pass increased costs on to their citizens because. As proposals are considered, stay tuned to GFOA’s newsletter and website for updates.

Reaching out to your Congress representation and articulating what the preservation of the tax exemption means to your jurisdiction is more important than ever. GFOA provides materials to help in this effort, and to keep you informed, during this hectic and exciting time via the Federal Liaison Center’s Federal Tax Exemption on Municipal Bond Interest Resource Center.