| WASHINGTON, March 20
WASHINGTON, March 20 One of the most powerful
members of the U.S. Congress - House Majority Leader Eric Cantor
- signaled his support on Wednesday for maintaining the tax
exemption of interest paid by municipal bonds, offering
reassurance to the state and local governments that use the debt
to finance infrastructure and other projects.
"The message was received at least in my office about the
importance of that benefit," Cantor, who as the second most
powerful Republican in the House has been key in most fiscal and
tax debates in Congress, told a meeting of the National
Association of State Treasurers.
"Lord knows we can't be pulling back on that right now given
the current state of our infrastructure," added Cantor, who is
For more than two years, President Barack Obama has
suggested limiting the exemption to increase federal tax
The idea gained traction at the end of 2012, when the
"fiscal cliff" crisis sent the U.S. government scrambling to
bring in money without raising taxes. Some political leaders
have broached doing away with it altogether.
State and local leaders say capping or eliminating the
exemption will cost them billions of dollars at a time when
their revenues are only just now recovering from 2007-09
The chairman of the committee drafting a reform plan for the
federal tax system, fellow Republican Dave Camp, has already
said he does not support a cap on the exemption.
Investors are willing to accept less in interest payments
from municipal bonds because of the exemption. That in turn
keeps borrowing costs low for the issuers in the $3.7 trillion
market using the bonds to finance infrastructure, schools and
Cantor added a note of caution, saying he had recently met
with members of a philanthropic organization lobbying Congress
to preserve the deduction people take for donations to
charities. The municipal bond tax break has "stiff competition,"
"You're up against the charitable deduction," he told the
treasurers, who were visiting Capitol Hilln to press for the
exemption. "The realtors are in town at some point. You're up
against the realtors and the mortgage deduction."
In fiscal year 2011, the U.S. government missed out on
collecting $30 billion in revenues because of the exemption,
according to a Congressional Budget Office report.