Tax-exempt municipal bonds must be preserved as part of any future tax code reform effort, AMWA wrote last week to the top House lawmaker in charge of federal tax policy.
AMWA sent its letter to House Ways and Means Committee Chairman Kevin Brady (R-Texas) less than a week after Brady’s panel released a 35-page blueprint that outlines GOP goals for overhauling the federal tax code. Titled “A Better Way: A Pro-Growth Tax Code for All Americans,” the document does not make explicit reference to tax-exempt municipal bonds but suggests reforms that could tax all individual interest income at the same rates as other investments. AMWA and others have previously warned that any imposition of federal taxes on municipal bond interest income will cause investors to raise interest rates and lead to higher infrastructure financing costs for communities nationwide.
“Imposing a de facto tax hike on water utility ratepayers, removing badly needed capital from local economies and leaving individuals with less money available for savings and investment” would be the result of new municipal bond interest taxes, AMWA’s letter explained. The association also noted that this outcome would conflict with an overarching goal of the “Better Way” tax plan, which is to spur additional economic activity across the country.
Congress is not expected to vote on a comprehensive tax reform plan this year, but the GOP’s blueprint will likely form the foundation of Ways and Means Committee activities on this issue going forward. Tax reform is expected to be high on the Republican congressional agenda next year if the party maintains its hold on the House majority following the November elections.