The Government Finance Officers Association takes note of the various proposals which have been advanced for the total or partial integration of corporate and individual income taxes. We express no position as to the merits of the basic integration concept. It is necessary, however, for us to express a position that any such proposal should include full recognition of the municipal bond exemption.
A specific municipal bond provision is needed in any integration proposal in order to reconcile the theory of integration with the theory of the municipal bond exemption. The absence of such a specific provision would constitute a significant disincentive for corporate investment in state and local securities. At the present time, corporations own a significant amount of the outstanding state and local government obligations. Given the borrowing needs of state and local governments, a disincentive for investments in state and local securities applicable to investors furnishing such a proportion of the funds borrowed would prove extremely expensive to state and local governments, and the Government Finance Officers Association opposes any legislation which would entail such consequences. Thus, any integration proposal should continue to provide at least the present relative benefit of ownership of state and local governmental bonds.
- Publication date: January 1978