Dozens of lawmakers are urging House leaders to reject proposals to eliminate or cap the exclusion for tax-exempt bonds.
"While we agree that we must reduce spending and our country's unsustainable debt, we should not be eliminating a vital tool for job growth and economic development, the 137 House members from both parties said in a letter sent this week to House Speaker John Boehner and House Minority Leader Nancy Pelosi.
The plea in the House comes after the Senate Finance Committee's top two tax-writers took a "blank slate" approach and asked their 98 colleagues recently to submit detailed proposals justifying which tax breaks should be kept in the tax code as they move forward on comprehensive tax reform.
The House lawmakers said that for more than a century, muni bonds have enjoyed tax-exempt states and have been the primary method by which state and local governments finance capital improvements and the development of infrastructure.
"These projects are engines of job creation and economic growth, and it is imperative that their tax-exempt status remains unchanged," the House members said.
They said that over the last decade, muni bonds have financed more than $1.9 trillion of infrastructure construction for schools, hospitals, airports, affordable housing, water and sewer facilities, public power utilities, roads and public transit.
"In 2012 alone, more than 6,600 tax-exempt bonds financed more than $179 billion in infrastructure financing," they told House leaders.
The letter pointed to President Obama's proposal to cap the value of tax exemption at 28%, which muni market participants have said would amount to a tax on tax-exempt bonds. Obama called for the cap in his fiscal 2014 budget proposals, after floating it in jobs legislation 2011 and every budget proposal since then.
The lawmakers warned that eliminating or capping the current tax exclusion for municipal bonds "would severely curtail state and local governments' ability to invest in themselves" and "would increase borrowing costs to public entities and shift costs to local residents through tax or rate increases."
"In these tenuous economic times, it would be irresponsible to jeopardize funding for the dedicated citizens who work in these important facilities such as teachers, firefighters, police officers, hospital workers and librarians as the construction workers who build them," the House members said.
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