Forty-two of the nation’s state treasurers are appealing to members of Congress to maintain the tax-exempt status of municipal bonds, an issue that has long-term ramifications for state budgets and the nation’s public infrastructure projects.
The state treasurers individually signed onto a letter to members of the U.S. House Ways and Means Committee urging them to maintain the current tax-exempt status of these bonds.
State and local governments use municipal bonds as the primary means of financing highways, bridges, transit systems, airports, water and wastewater systems, schools, higher education facilities and many other public projects. The treasurers are members of the National Association of State Treasurers (NAST), a bipartisan organization of state treasurers and other finance officials with similar duties.
“The need to build and maintain our public infrastructure has never been more acute,” said NAST President and Virginia State Treasurer Manju Ganeriwala. “Three quarters of all public infrastructure projects in the United States are built by state and local governmental entities. Eliminating or reducing the tax exemption will greatly limit our ability to address these critical needs, resulting in fewer projects, fewer jobs and deteriorating infrastructure.”
States and localities save an average of 25 to 30 percent on interest costs when using municipal bonds as opposed to taxable bonds. In an era of constrained federal and state budgets, the ability to save billions of dollars on infrastructure financing is essential. Eliminating the tax exemption will cause states and localities to pay higher borrowing costs and as a result, many will be forced to either curtail infrastructure projects or raise taxes on sales, property or income.
“The tax-exempt bond market has worked effectively for over a century,” said NAST President Ganeriwala. “NAST supports maintaining the current tax exemption. Let’s not dismantle something that works.”