On June 24, 2016, House Republicans released a Blueprint for Tax Reform that is intended to act as a guide for future comprehensive tax reform. The strategy includes several significant reforms to the current tax code:
- It reduces the corporate income tax rate to 20%.
- It reduces the current seven-bracket individual income tax rate to three brackets, with a top rate of 33%.
- It repeals the alternative minimum tax for both corporations and individuals.
The blueprint does not directly address the tax exemption of municipal bonds but does mention repealing so-called “special interest” provisions. The plan does not include a discussion draft with legislative language and it will not likely be put on the House floor for a vote this year; however, GFOA will continue to communicate and educate members of Congress about the how important the maintenance of the federal tax exemption on municipal bonds is in promoting job creation and improving the nation’s infrastructure.
GFOA public policy statements emphasize the long-standing partnership between the federal government and state and local governments through the federal tax exemption on municipal bond interest. This long-standing federal tax policy, promulgated in 1913, is neither a loophole nor a special interest tagalong provision, but rather a fundamental component of our intergovernmental partnership and a safe and reliable investment. The exemption needs to be maintained to provide much-needed and irreplaceable resources to finance the nation’s infrastructure needs. Through this critical financing tool, state and local governments save approximately two percentage points on their borrowing costs for financing the vast majority of public infrastructure in our nation, which translates into a substantial savings to local taxpayers.
GFOA will continue to meet with House Speaker Paul Ryan (R-WI) and Kevin Brady (R-TX), chairman of the House Ways and Means Committee, in addition to all members of the Ways and Means committee to communicate this message and ensure that the tax exemption of municipal debt remains intact.