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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 that will include significant cuts to corporate and individual income tax rates. Other anticipated provisions include increasing the standard deduction and eliminating the state and local tax deduction. While there is no legislation yet, it will be necessary for Congress to eliminate a number of tax breaks to cover revenue losses the tax cuts will yield, and the municipal bond tax exemption is one of the exemptions that is on the table.

It is extremely important that Georgia’s delegation members hear directly from city officials about how municipal bonds have been used in your community. Please provide your Congress Member with specific examples to illustrate how municipal bond financing has been used to complete projects in your city, in particular describing the return on investment including jobs created, private investment leveraged, economic development that occurred as a result of the project, and information about why your city chose to use this financing mechanism.

GMA’s member cities have long held preservation of the municipal bond tax exemption as a top priority. Preliminary projections based on responses from GMA’s recent capital needs survey indicate that cities will require approximately $12 billion to complete capital improvements for water and sewer, stormwater, transportation, public safety, and other critical needs over the next five years. If the municipal bond tax exemption is eliminated or limited, local governments will be forced to pay more to finance projects, leading to less infrastructure investment, fewer jobs and a greater burden on local residents in the form of higher taxes and fees.

GMA encourages its members to take time to contact your member of Congress to discuss this issue.