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ACTION ALERT: Contact U.S. Reps. & Sens. On Municipal Bonds, Internet Sales Tax

March 19, 2013

Congress could take action as soon as tomorrow on two issues of critical importance to municipal budgets – the tax exemption on municipal bonds and sales taxes on Internet purchases. Contact your U.S. Representatives and Senators now and let them know how important these issues are to your finances.

Tax Exemption on Municipal Bonds – ACTION: Contact Senators Richard Burr and Kay Hagan now. Ask them to speak out in support of tax-exempt municipal bonds during Senate debate of the FY2014 Budget Resolution this week. Sen. Mark Begich (D-AK) is preparing a letter to President Barack Obama supporting the tax-exempt status of municipal bonds. Ask them to sign on to that letter when it becomes available. Contact your Representatives and ask them to support House Resolution 112 celebrating the importance of municipal bonds.

BACKGROUND: Since the beginning of the federal income tax in 1913, the interest on most “public purpose” general obligation and revenue bonds issued by state and local governments has been exempt from federal income taxation. Proposals have been put forth to change that as a way to reduce the federal deficit and simplify the nation’s tax code.

Tax-exempt municipal bonds are the most important tool available for financing municipal infrastructure projects.  States and local governments nationwide have financed more than $1.65 trillion of infrastructure investment since 2003. Nearly $258 billion of that went toward water and sewer facilities. Almost $178 billion of that went toward roads, highways and streets.

The U.S. Senate Budget Resolution suggests the possibility of a cap on tax expenditures, which could include the exemption for interest earned on municipal bonds. The White House has proposed a 28 percent cap on the exemption, while the Simpson-Bowles Commission has recommended its elimination. Estimates have indicated that the cap would have cost North Carolina governments an additional $3.0 billion between 2003 and 2012, while the repeal of the tax-exempt status would have cost $8.5 billion over the same time period.

For more on the tax-exempt status of municipal bonds see here.

Internet Sales Tax – ACTION: Sponsors of Internet sales tax legislation, including Sen. Mike Enzi (R-WY), are planning to offer it as an amendment to the FY2014 Budget Resolution this week to show the Senate’s support for the legislation. Contact Senators Richard Burr and Kay Hagan now and ask them to support Sen. Enzi’s amendment regarding the Marketplace Fairness Act. It is critical that the amendment receive 60 votes to show the Senate’s support for this legislation.

BACKGROUND: Bipartisan legislation has been filed in both the House and the Senate (H.R. 684/S. 336) to give states and local governments the authority to collect sales taxes on remote sales, including online purchases. Estimates are that states and local governments in N.C. lost out on more than $436 million in 2012 alone by not being able to collect these taxes. The Marketplace Fairness Act is supported by a wide range of stakeholders, including the N.C. League of Municipalities, N.C. Association of County Commissioners, N.C. School Boards Association, N.C. Retail Merchants Association, and Amazon.com.

For more on this issue see here and here. Please let the League know if we can be of assistance on any of these matters.

Posted on March 19, 2013 by Chris Nida