Feb 13 President Barack Obama is not aiming his
proposal to cap the value of tax breaks at the exemption for
municipal debt, but he is looking into ways to generate revenue
and revamp the tax code, U.S. Treasury Secretary nominee Jack
Lew said on Wednesday.
"The administration's proposal which would have limited the
value of deductions in the ... top tax bracket to 28 percent was
designed to try and restore some equity in the tax code and to
generate revenue that we need for meeting our fiscal targets,"
Lew told the U.S. Senate Finance Committee.
"It wasn't specifically directed at municipal bonds or at
other specific areas of tax activity."
Concerns that policymakers in Washington could change the
tax-exempt status of municipal debt has been hanging over the
$3.7 trillion U.S. municipal debt market for months.
State and local officials have been lobbying to leave the
exemption untouched as the muni market provides them with cheap
loans from investors who earn income on debt payments free from
At the confirmation hearing, Senator Maria Cantwell, a
Democrat from Washington, asked about Obama's intention to cap
municipal bonds' exemptions. Lew said that the President's
primary commitment was tax reform.
"It was also meant to be a placeholder that we really should
have tax reform and we should make specific policies deciding
what's in and what's out and what the proper tax rates are," he
said. "But we put it in as a fall-back, saying that if tax
reform doesn't happen, this is something that would help us to
get to the revenue targets we need.