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House lawmakers urged to consider impacts of changing the tax treatment of municipal bonds


From the March 20, 2013 issue of Public Power Daily

Originally published March 20, 2013

In considering tax reform, the House Ways and Means Committee should look carefully at the effect changing the federal tax treatment of municipal bonds would have on critical infrastructure investments and the price that public power customers pay for electricity, especially small business and low- and fixed-income households, APPA, the Large Public Power Council and the Transmission Access Policy Study Group (TAPS) said yesterday. The committee yesterday held a hearing on tax reform and tax provisions affecting state and local governments.

Every year, on average, public power utilities make $15 billion in new investments financed with municipal bonds, APPA, LPPC and TAPS said. This includes investments in power generation, distribution, reliability, demand control, efficiency and emissions control: all needed to deliver safe, affordable, and reliable electricity.

A variety of proposals to alter the federal tax treatment of municipal bonds are being discussed, the public power groups said. All would significantly increase borrowing costs for public power providers large and small, according to a recent report prepared for APPA.

Critics raise a variety of inaccurate, overstated or antiquated arguments for taxing municipal bonds, APPA and the others said. "All ignore the market reality that such a tax would simply raise federal revenue on the backs of state and local residents, particularly on the low-income households and small businesses who could least afford it, and reduce local infrastructure investments."

A longstanding and comprehensive federal legislative and regulatory system ensures that tax-exempt municipal bonds are used for legitimate governmental purposes, the public power groups said. "Maintaining the tax-exempt status of municipal bonds is essential to help our national economy grow, create jobs and best serve the interests of every community."

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