Texas Municipal League: Municipal bonds threatened by federal tax reform

Texas Municipal League: Municipal bonds threatened by federal tax reform

AUSTIN – The primary means for financing the nation’s urban infrastructure for the past 100 years could be on the chopping block in federal tax reform discussions under way in Washington, the Texas Municipal League warned Friday.

“Since the creation of the federal income tax in 1913, the interest that investors earn on municipal bonds hasn’t been taxed, enabling cities to pay lower interest rates when financing projects like street construction, water and sewer lines, treatment plants and police and fire stations,” said Bennett Sandlin, Executive Director of the Texas Municipal League.

If the tax exemption is eliminated or reduced, the cost of nearly every public construction project will increase – not only for cities but also for counties, school districts and states, Sandlin said.

“With budgets being cut at every level of government in recent years, Texas keeps falling further behind in meeting the infrastructure needs of our fast growing population,” he said. “If more local tax dollars have to go toward interest payments, fewer dollars will go into actual construction and the list of unmet needs will grow even longer.”

“Limiting the tax exemption on municipal bond interest might increase revenues at the federal level but the unintended consequence for city taxpayers will be either higher taxes to support bond issues or reductions in capital improvements.”

Organizations representing state and local bond issuers around the country have formed a new advocacy group called Municipal Bonds for America to make the case for preserving the tax-exempt status of municipal bonds.

To see the TML’s Press Release and article from the Houston Bay Area News, click here.

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