Skip to comments.Tax Reform and Pension Reform
Posted on 03/13/2014 2:08:57 PM PDT by ThethoughtsofGreg
Congressman Dave Camps recently released tax reform draft has stimulated a much-needed national conversation about the U.S. tax code, attracting praise, criticism and skepticism. Buried in the plan is one tax change that could significantly influence the pension reform debate now raging nationwide at the state and local level.
Camps plan would require top earners to pay a surtax on previously untaxed municipal (muni) bond interest. Currently, state and local governments use tax-exempt muni bonds to fund capital projects such as bridges and new school buildings. The proposed surtax might negatively affect top bracket taxpayers willingness to invest in muni bonds.
Overall, eliminating this tax preference might be good tax policy. But in the near-term, the surtax will squeeze already tight municipal budgets. Adding a surtax to muni-bond interestwhich effectively increases the cost of issuing muni bondscould force state and local governments to choose whether to fund pensions or capital projects. Governments should act quickly to reform the greatest existing threat to their budgets: unfunded pension liabilities.
(Excerpt) Read more at americanlegislator.org ...