Debt Management

Recycling the Muni Exemption Debate

Page from GFR

With a bit of late summer, pre-midterm election legislative maneuvering, Congress passed the Inflation Reduction Act of 2022 (IRA). Critics and defenders of the law both seem to agree that its name doesn’t describe its main objective. In fact, the IRA is really a climate bill. It calls for $737 billion in new spending over the next decade, most of it for climate-focused investments like energy security, climate adaptation, and drought resiliency.

As is often the case with major pieces of federal legislation, IRA’s unintended consequences could far outweigh its intentions. That’s especially true for state and local finance. If IRA works as intended, we’ll see a lot more wind farms, solar panels, recycling facilities, and electric vehicles. But this legislation might also inadvertently reopen a longstanding and acrimonious debate about the federal government’s role in the municipal bond market.