National Association of Counties
Washington, D.C.

 Breaking: NACo President Rodgers warns against taxing municipal bonds

By Charles Taylor

NACo President Chris Rodgers explains why municipal bonds are an important financing tool for county governments. He spoke at the National Press Club on Feb. 27, 2013.

Against a backdrop proclaiming “Don’t Mess with Our Bonds,” NACo President Chris Rodgers today called on Congress and the Administration to reject changes in the tax-exempt status of municipal bonds that would harm counties’ ability to finance local infrastructure projects. 

“Maintaining the tax exemption prevents shifting new burdens to state and local governments,” Rodgers said, “because borrowing costs would increase, which hurts local taxpayers and can jeopardize whether local projects are completed.”
State and local governments financed more than $1.65 trillion of infrastructure investment between 2003 and 2012 through the tax-exempt bond market, according to Protecting Bonds to Save Infrastructure and Jobs, a new report released at a Washington, D.C. media briefing by NACo, the National League of Cities and the U.S. Conference of Mayors.

Bullet Read more about what taxing municpal bonds means for counties

Rodgers said muni bonds offer local governments a low-cost way to finance projects such as schools, hospitals, water, sewer facilities, public power utilities, roads and mass transit.

However, proposals at the federal level would curtail or eliminate the IRS tax exemption for municipal bond interest. One would impose a 28 percent benefit cap for certain taxpayers on many itemized deductions and exclusions, including tax-exempt interest. Had such a cap been in effect over the last decade, it would have cost states and localities an extra $173 billion in interest payments, according to the report.  A full repeal of the exemption would cost $495.3 billion.
The research compiled with assistance from the Government Finance Officers Association, highlights the broad use of muni bonds in several counties including Linn County, Iowa;  Montgomery and Prince George’s counties (Md.); Grand Traverse County, Mich.; Taney County, Mo.; Douglas County, Neb.; and Mecklenburg and Wake counties (N.C.); Athens County, Ohio; and Fairfax County, Va.