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Download bonds promote fiscal responsibility
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BONDS PROMOTE FISCAL RESPONSIBILITY Some policymakers and outside interest groups seeking to pay for new federal spending or cuts in federalincometaxrateshavecalledforataxonmunicipalbondinterest.Somewouldrationalizethis unprecedented move by arguing that the current tax-exemption for bond interest has led to runaway stateandlocalspendingonunwiseorunnecessaryprojects.Nothingcouldbefurtherfromthetruth. Bondsholdstateandlocalgovernmentsaccountable. • Generally,municipalbondsmustbeapprovedbyvoterreferendumoranaffirmativevoteofa governmentalbody(acitycouncil,countycouncil,utilityboard,orthelike). • The federal tax exemption for bond interest reduces borrowing costs, but it is state and local residentswhorepayprincipalandinterest. Historyshowsthatstateandlocalgovernmentshaveusedbondsresponsibly. • Overthelastdecade,whilefederaldebthasnearlydoubled(bothinrealdollarsandasa percentofGDP),stateandlocaldebthasremainedflatinrealdollarsanddeclinedasa percentageofGDP.1 *** 1 BoardofGovernorsoftheFederalReserve,FlowofFundsAccountsoftheUnitedStates,(Sept.16,2016). MunicipalBondsforAmerica(MBFA)isanon-partisanstakeholdercoalitionofmunicipalbondissuers,Stateandlocalgovernment officials,andregionalbrokerdealersworkingtogethertoexplainthemanybenefitsofmunicipalbonds,highlightingthefederaltaxexemptionwhichenablesfinancingofvitalinfrastructureprojectsatthelowestcosttoresidentswhilemaintainingtheintegrityand valueofthemunicipalbondmarketandprovidingthehighestqualityinvestmentsformunicipalbondinvestors. February 22, 2017 Municipal Bonds for America Coalition – www.munibondsforamerica.org
