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amBArjra.fp inirffirrisopi Position Statement Tax-exempt municipal bonds Comprehensive tax reform is a top priority for Capitol Hill in 2017. As Congress embarks upon this effort, we urge all members to keep in mind - - that tax-exempt municipal bonds are critical financing tools for all public power utilities, which are entities of state and local governments. - , ----- 4 „..... Tax-exempt bonds help build utility and community infrastructure. Nearly three-quarters of the infrastructure built in the U.S.— �F_ r including roads, bridges, schools, , hospitals, water and wastewater sI treatment plants, and publicly- :410 ; owned electric utility facilities—is financed with muni bonds. These " bonds are desirable to investors Tax-exempt bonds help build infrastructure necessary for health and economic because the earned interest is growth. not subject to federal income tax. General obligation bonds are backed An outright repeal of the tax exemption for by the full faith and credit of the issuing public municipal bonds would increase borrowing costs entity so investors are paid even if the issuer has by 47 percent. Prior White House budget proposals to raise taxes to make the payments. Municipal sought to soften this effect by capping the tax electric utilities and joint action agencies rely value of the exclusion on muni bonds rather than almost exclusively on revenue bonds, which repealing it; this would amount to a surtax on the are paid for out of the revenue from the project interest of those bonds and still would increase financed and are not dependent on tax revenue. continued on next page The federal tax exemption on municipal bondos ••••••44jinterest has been in place since enactment of the + 12 _ - $ r �z 7 i -#.1 44 t. very first federal tax code in 1913. It has allowed 26 8 _12_4i—r----24:!! , #r1 o 163 state and local governments to save, on average, 305,9 _f 2 -i- — '-66t ? a an estimated two percentage points on their --, R~80"— S6 2 i 300 'T rii borrowing, which translates into a 25 percent fl --..;f 81-:14— j--..t► ,",~- 300 7: 26,87 savings in public infrastructure costs over time. 3/3, 5 57 -(("r - ]l Skio — The municipal bond market gives close to 42,000 ee �2 ty �>`` ~�� governmental issuers access to investors, of which ee2�, ar fi t2[ 37 CO— over 70 percent are individual households. Nearly 3� 3s 53 -�, C y •,-,_ -n 7 s 3}— 60 percent of this household tax-exempt interest 1 se 1* -_' -6g 1 -' e9 so— is earned by taxpayers over 65 years old. Over 34*I 15715 _ Clio---i' + - 1-----------6 r the past few decades, tax-exempt financing has -•-- i --9- "'n generated trillions of dollars of investment in Over the past few decades,tax-exempt financing has vital public infrastructure, saving state and local generated trillions of dollars of investment in vital public infrastructure,saving state and local governments hundreds governments hundreds of billions of dollars in interest costs. of billions of dollars in interest costs. 2017 Federal Position Statements/3 172