Metro Economies Committee

Mayor Paige Cognetti

Scranton | Chair

Mayor Tim Keller

Albuquerque | Vice Chair

 

 

The U.S. House of Representatives Budget Committee has put the repeal of tax-exempt municipal bonds on a list of possible pay-fors for a budget reconciliation bill and the rewrite of the 2017 tax law. According to Scranton Mayor Paige Cognetti, Chair of USCM’s Metro Economies Committee, “we must be prepared to fight any proposal to eliminate the tax exemption for municipal bonds.”

It is projected that an elimination of tax exemption would raise borrowing costs by $832.98 billion between 2026 and 2035, a cost that would be passed onto taxpayers and lead to a $6,554.67 tax and rate increase for each American household over the next decade.

In 2016, 74% of the more than $3.8 trillion tax-exempt bonds outstanding were held by individuals through direct and indirect investments such as mutual funds and government retirement plans.

Impact on the Housing Crisis

Deals involving 4% low-income housing tax credits (LIHTCs) require mortgage revenue bonds (MRBs), a type of private activity bond (PAB). Losing tax-exempt status on MRBs would substantially increase the cost of affordable housing production, making it more difficult to finance projects that provide housing for low-income families and making our housing crisis worse.

Private activity bonds (PABs) are tax-exempt bonds that fund public purpose projects managed by private enterprises. These bonds are particularly crucial to affordable housing. PABs like Mortgage Revenue Bonds (MRBs) and Tax-Exempt Multifamily Housing Bonds are used by state housing finance agencies (FHAs) to finance low-interest mortgages for low- and moderate-income homebuyers and to build multifamily housing for low-income families.

Helpful Links

The links below provide more information on tax-exempt municipal bonds, including tax-exempt muni issuances since 1995 for each congressional district.