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May 31, 2013

RE:  Urge Your Congressman to Support Effort to Protect Tax Exempt
         Municipal Bonds

Dear Mayor:

Please contact your Congressman on this important matter.

The President's budget proposal includes a cap on the tax exemption of interest earned on municipal bonds. The proposal would 'cap' the tax exemption at 28% of the total of interest earned. An investor would pay taxes on 62% of her or his interest earnings. It is estimated that, if this had been in place over the last 10 years, $173 billion would have been added nationwide to local borrowing costs.

Tax-exempt bonds have been in place for 100 years. This system of financing is a great example of how the partnership between the federal, state and local government should work. It has proven to be a low-cost efficient way for local governments to finance schools, hospitals, roads, water and sewage systems, transit systems and other critical infrastructure.

The real and ultimate beneficiaries of this tax exemption are municipalities and their residents. If the exemption is removed or limited, local governments and residents will be adversely impacted. We will need to offer higher rates of return resulting in greater expenses to invest in the building or rebuilding of roads, bridges, schools, libraries, water and sewer facilities, fire stations and other projects meant to meet the needs of families and businesses. This will force New Jersey municipalities to either raise property taxes to cover the increased interest, or to forego the needed investments.

If any limits are imposed on this common sense way to keep taxes lower, while producing work for local businesses and jobs for our citizens, and modernizing critical infrastructure, the costs of the these projects will increase and property taxes will rise.

Kindly ask your Congressman to co-sponsor House Resolution 112, which is co-sponsored by former local elected officials, Representatives Lee Terry (R-NE) and Richard Neal (D-MA). Commemorating the 100-year precedent of the federal tax exemption of municipal bonds, the resolution reinforces the importance of these bonds to municipalities across the country. To date, Congressman Bill Pascrell is the only New Jersey Representative who is a co-sponsor. We thank him for his position and leadership.

We have also learned that Representatives C.A. "Dutch" Ruppersberger D-MD) and Randy Hultgren (R-IL) have recently circulated a "Dear Colleague" letter to all House members, asking for their support on This issue.  They aim to urge Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) to reject any proposal limiting the value of the tax-exemption for municipal bonds.

It is important that you reach out and ask your Congressman to endorse that letter and to sign on to House Resolution 112.  Thank you for your anticipated assistance on this significant municipal issue.

Very truly yours,

Janice S. Mironov. President,
New Jersey League of Municipalities,
Mayor, East Windsor Township



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