As Congress debates the future of tax exemption for municipal bond interest, one industry professional says it’s time for those whom it will directly affect – state and local government officials, taxpayers and citizens – to speak up.
In a recent report entitled, “A Century of Tax-Exempt Municipal Bonds: The Good, the Bad and the Ugly,” Ronald Bernardi, president and CEO of Bernardi Securities, Inc. says, “If these collective voices go unheeded, rest assured, the financial necks of towns, cities, villages, counties, school, water, sewer and park districts across the country will be snug in a noose…”
Bernardi highlights the many benefits of the tax-exempt bond market (“the good”) – from providing a low-cost financing vehicle for state and local governments to creating jobs for local citizens, investment in public purpose infrastructure projects, and ensuring local input and control over community projects.
He also addresses the major criticisms of municipal bond tax exemption (“the bad”) and the challenges that state and local governments would likely face if tax exemption is repealed (“the ugly”).
“If these collective voices go unheeded, rest assured, the financial necks of towns, cities, villages, counties, school, water, sewer and park districts across the country will be snug in a noose ….”
With the acknowledgement that, like all markets, the municipal bond market has its inefficiencies, Bernardi says that they are overstated by critics. He also debunks other claims, including the perceived disproportionate benefit to wealthy taxpayers.
He says that the U.S. public finance market, one that is “envied around the world,” has provided a reliable source of funding for state and local governments and infrastructure projects for 100 years. He recommends a variety of steps that Congress could take to strengthen the market, including refining the scope of public purpose infrastructure projects, reinstating a modified Build America Bond program, and improving issuer disclosure practices.
But Bernardi’s overall stance is clear: “If we believe in the principles of federalism embodied in the Constitution, if we believe states and local governments should have wide latitude to independently finance public purpose infrastructure projects their citizens need, want and are willing to pay for – then radical changes to the present day municipal bond market should not occur.”
For a complete copy of the Bernardi Securities report, click on this link: “A Century of Tax-Exempt Municipal Bonds: The Good, the Bad and the Ugly,” or contact Dan Simpson at firstname.lastname@example.org or (312) 281-2008.