Don't Touch Oro Valley's Municipal Bond Tax Exemption

The National League of Cities and Towns ("NLC") is actively advocating that the federal tax code retain the tax exempt status of municipal bonds.  Thiswas report by Council Member Mike Zinkin at November 20 Oro Valley Town Council Meeting.  The League represents cities and towns in Washington.

The tax exemption of municipal bond interest allows Oro Valley to borrow at interest rates that are half of the interest rate paid corporate borrowers.  This is because the interest in bonds paid by corporate borrowers is taxable to the bondholder.

All who invest will be impacted by this change, if it occurred.   Some will see if they purchase bonds in their own name. Others will see it if they own mutual funds, get insurance proceeds, or other retirement benefits. This is because these other investment vehicles invest in municipal bonds.

Eliminating that tax exemption will raise the cost of borrowing to municipalities. It will also put municipalities in competition for borrowing money, possible raising borrowing costs further.

The result would be that the Town Of Oro Valley would pay more in interest on new bonds issued.  This would reduce funds available to fund services; and it could result in the need for new tax assessments to replace the increase the cost of borrowing.  Either way, it would impact all residents.

So, the League of Cities and Towns has take the following position in Washington:  "Don't Touch Our Bonds."

Zinkin also reported two other NLC initiatives.   One relates to forcing you to pay sales taxes on everything you purchase online. This is called the "Marketplace Fairness Act."  Its yet another way to get more money from you.  The other is NLC's support of legalizing the 11 million estimated illegal ("undocumented") immigrants currently in the US.  Watch his update to learn more on these.
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