The League of Minnesota Cities and the Association of Minnesota Counties sent a letter to the Minnesota congressional delegation with input on two key tax reform proposals currently being discussed at the federal level.
(Published Oct 23, 2017)
As Congress begins its work on tax reform, the League and the Association of Minnesota Counties (AMC) have submitted a letter to members of the Minnesota congressional delegation on two key provisions being discussed. The letter urges members to oppose the elimination of the tax-exempt status of municipal bond interest and of the income tax deduction for state and local taxes.
Tax-exemption status of municipal bonds
While it remains unclear if the tax-exemption status of municipal bonds is on the chopping block, it is critical to continue to discuss this important exemption. Municipal bonds serve as a major financing tool to fund necessary community projects and infrastructure improvements.
In the last 10 years, municipal bonds allowed for over $3 trillion in infrastructure investment nationwide and over $30 billion in Minnesota alone. This financing tool has allowed cities and counties to make necessary infrastructure and community development investments while saving local taxpayers millions of dollars in borrowing costs.
Whether it is financing government services such as power, water, police, and fire, or key infrastructure investments such as county highways, airports, hospital construction, and law enforcement centers, every Minnesota community and their taxpayers have benefited from this important financing mechanism. Any efforts to repeal the municipal bond tax exemption will certainly increase the costs of building projects and increase property tax burdens for our residents.
Income tax deduction for state and local taxes (SALT)
Cities and counties continue to monitor discussions surrounding the possible elimination of the SALT deduction. In 2015 alone, nearly 1 million Minnesota households took advantage of the state and local tax deduction.
Local governments are concerned that the loss of this deduction would not only increase individual taxpayer burdens, but also create a form of double taxation that will adversely impact local governments from raising future revenues to maintain core services.
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