The House Ways and Means Committee in October released a short video to promote the panel’s “A Better Way” proposal to simplify and streamline the tax code, though the video offers no additional details about how the status of tax-exempt municipal bonds may be affected by the tax plan.
Released by Ways and Means Committee Republicans in June, the “Better Way” plan is currently little more than an outline explaining the GOP’s desire to create a “pro-growth” tax code that would “simplify, flatten, and lower tax rates for families and individuals” while repealing “special-interest provisions [that] require higher tax rates to compensate for the lost revenue.” While the blueprint takes a high-level view of tax reform, it does suggest that interest income generally would be taxed at the same rates as individual income, capital gains, and dividends.
In a June letter to the Ways and Means Committee, AMWA warned that taxing all interest income – including interest earned on municipal bonds that are presently tax-exempt – would increase infrastructure financing costs for communities, as investors would demand higher interest rates to offset new federal taxation of municipal bond income. AMWA also continues to coordinate with several stakeholder organizations that are dedicated to preserving tax-exempt municipal bonds.
Republican leaders of the House Ways and Means Committee reportedly hope to begin working in earnest on a tax reform bill in 2017, but its eventual provisions and ultimate chances for success will be heavily influenced by the outcome of the November elections. In the meantime, the committee is inviting stakeholder feedback on its initial plan blueprint, so AMWA members are encouraged to weigh in with statements in support of preserving tax-exempt municipal bond interest.