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Federal Tax Reform

Municipal Bond Tax Exemption

As Congress continues to deliberate tax reform, municipal bonds are at risk of being eliminated or capped. If proposals to eliminate or limit the tax exemption become law, local governments will pay more to finance projects, leading to less infrastructure investment, fewer jobs, and greater burdens on those who will have to pay higher taxes and fees.

Municipal bonds have been a foundation for local infrastructure finance for over 100 years. The threat to this important resource is very real, and Georgia’s delegation members need to hear from city officials. GMA encourages all city officials to touch base with your Senators and Congressmen to urge them to protect the tax treatment for municipal bonds.

In 2016, U.S. Reps. Dutch Ruppersberger (D.-MD) and Randy Hultgren (R.-IL) co-founded the Municipal Finance Caucus of the U.S. House of Representatives. Created to fight for the right of state and local governments to independently finance the projects they need to keep their communities strong, the Municipal Finance Caucus is also focused on maintaining the current federal tax exemption for municipal bonds. Please contact your Congressman and urge him to join this bipartisan caucus and protect Georgia's state and local governments' access to this important infrastructure financing tool.


Congress is also considering eliminating or capping the deductibility of State and Local Taxes (property, income, and sales taxes) to partially offset the anticipated loss in federal revenue that will come with proposed federal tax cuts. Eliminating or capping SALT presents concerns for city officials. The SALT deduction allows taxpayers to avoid being taxed twice on the same income. Local governments use revenues from local property taxes to finance long term infrastructure projects, local law enforcement, emergency assistance, and other services. Eliminating SALT will result in a tax shift as local property tax increases will be required to pay for critical services. SALT provides a strong incentive for homeownership and provides incentives for encouraging spending, which facilitates economic growth. SALT is used by 33% of taxpayers in Georgia - the average deduction is $9,158.


Tax Reform to Potentially Impact Municipal Bond Tax Exemption 
September 26, 2017
The White House and a group of Republican legislators and administration officials known as the “Big Six” are expected to release a framework for tax reform on Wednesday and the municipal bond tax exemption is one of the exemptions that is on the table.

As Trump Eyes Infrastructure, State and Local Leaders Defend Tax-Exempt ‘Muni Bonds’ As Trump Eyes Infrastructure, State and Local Leaders Defend Tax-Exempt ‘Muni Bonds’ 
February 28, 2017   |  Elaine S. Povich for The Pew Charitable Trusts
In 2016, there were $423.8 billion in new municipal bond sales, which include bonds issued by state authorities, water and sewer districts, local authorities, municipalities, counties, and colleges and universities.

Repeal of Muni-Bond Tax Exemption Would Costs Georgia Taxpayers Billions Repeal of Muni-Bond Tax Exemption Would Costs Georgia Taxpayers Billions 
August 8, 2013   |  National Association of Counties
The estimated costs of the repeal of tax-exempt status on municipal bonds would have cost Georgia taxpayers $12.3 billion between 2003 and 2012.

Municipal Bond Issues: Not Just for Large Cities 
June 6, 2013   |  Tony King, Kidwell & Company
Hundreds of small cities in Georgia are faced with the same dilemma: a capital project that they want to complete to make their community a better place to live.

Muni Bond Interest Cap Would Increase Financing Costs by $173 Billion Muni Bond Interest Cap Would Increase Financing Costs by $173 Billion 
March 13, 2013   |  National League of Cities, National Association of Counties & U.S. Conference of Mayors
The imposition of a 28% benefit cap on interest income on municipal bonds would have increased costs by over $173 billion since 2003.