Tax Changes on Municipal Bonds in President’s Budget Will Impact Public Power Infrastructure Investments, Price for Power, April 10, 2013

April 10, 2013
Contact: Lawrence Pacheco
(202) 346-8855

Washington, DC— Lonnie N. Carter, chairman of The Large Public Power Council, released the following statement regarding the White House proposal to cap the tax-exemption on municipal bonds that was included in the proposed budget for 2014:

“The president’s proposal to cap the tax exemption for interest on municipal bonds is a significant threat to state and local governments and other municipal entities—including publicly owned utilities—and will negatively impact investment in critical infrastructure.

“While intended to limit the benefit for higher-income earners, the 28 percent cap will in effect be a tax on all Americans. It will increase borrowing costs by up to 25 percent for issuers of municipal bonds and cause higher costs for investments in essential infrastructure. In the case of public power, the higher costs will ultimately be passed through in higher electricity rates, which will disproportionately impact the customers who least can afford it—fixed- and low-income households and small businesses.

“While the president is talking about making investments in infrastructure, he is proposing to weaken the most important tool that state and local governments have for financing those investments. The president’s America Fast Forward Bonds program might be an option for attracting private investment in infrastructure. However, it should not be a replacement for the stable and mature municipal bond market.

“Municipal bonds have been the primary financing tool that has allowed not-for-profit public power systems to build the generation and transmission facilities needed to deliver affordable and reliable electricity to more than 45 million people throughout the country. The president’s proposal will fundamentally change our ability to build vital infrastructure projects and keep power prices affordable for the customers we serve. Over the next year, LPPC will work with Congress for policies that will strengthen infrastructure investment and create jobs.”