On April 4, NACo, in partnership with other state and local governmental organizations, sent a letter to all members of Congress urging lawmakers to preserve both the tax exemption for municipal bonds and the state and local tax (SALT) deduction. NACo was joined on the letter by the National Governors Association, National League of Cities, U.S. Conference of Mayors, National Conference of State Legislatures, Council of State Governments and the International City/County Management Association.

Tax-exempt municipal bonds have been a fundamental feature of the United States tax code since 1913 and remain the primary method used by states and local governments to fund public infrastructure projects, including our roads, bridges, schools, hospitals, water infrastructure and much more. In fact, over the last decade, state and local governments have financed $3.8 trillion dollars in infrastructure investments using municipal bonds. Any changes to their tax-exempt status – either a complete elimination or a cap on the exemption – would drive up the costs of financing this critical infrastructure for both counties and taxpayers.

Another priority for counties in tax reform is protecting the SALT deduction, which was also included in the original 1913 tax code. The SALT deduction allows taxpayers to deduct state and local taxes paid, including property and income tax, from their federal taxable income. This provision provides counties some measure of autonomy over our own tax systems and incentivizes local investment in various services, including health, education and transportation. Eliminating or capping the SALT deduction would represent double taxation on taxpayers and could greatly constrain policy options available to state and local governments.

As tax reform discussions continue, we will continue working with Congress to ensure counties’ interest are represented and maintained in a comprehensive tax overhaul.

To read the full letter, please click here.