Tags: GOP | Local | Tax Deductions

The Hill: GOP to Take Aim at Local Tax Deductions

Image: The Hill: GOP to Take Aim at Local Tax Deductions

(AP)

By    |   Tuesday, 10 Jan 2017 11:17 AM

Republicans are looking to lower tax rates and cut out tax breaks, which could lead to issues for state and local governments, according to The Hill.

The deduction for state and local taxes and the tax exemption for municipal bonds, two of the most expensive parts of the tax code, could be in danger. The state and local tax deduction tend to benefit Democratic areas, and it could be more likely to be repealed, The Hill reports.

Groups that represent state and local governments say removing the deduction could put states under pressure to reduce taxes.

"We're big proponents of federalism and we feel this strikes at the heart of it," said Brett Bolton, the principal associate for federal advocacy at National League of Cities.

Max Behlke, the director of budget and tax policy at the National Conference of State Legislatures, said President-elect Donald Trump might defer to Congress on removing the deduction, but he could also favor keeping it, since he is from New York, a state with a high income tax.

Keeping the municipal bond tax exemption is a priority for state and local governments, according to The Hill. The exemption allows those governments to borrow at lower rates when they issue debt for infrastructure projects.

Groups in a public finance network sent legislators a letter Tuesday in support of tax-exempt bonds.

"They are the best way to implement the infrastructure needs of each community effectively, as the decision to issue bonds for various projects is determined and approved by either the citizens themselves through both referenda or their elected legislative bodies," the groups' letter said.

Lawmakers from both parties favor the exemption. Illinois Republican Randy Hultgren and Maryland Democrat Dutch Ruppersberger launched a municipal finance caucus in 2016.

"Tax reform is complex and wrought with many pressures," said Hultgren. "I hope to see this key financial tool, which has worked for more than a century, maintained in a much-needed comprehensive tax reform package."

Trump told a group of mayors in December that he supports the bond exemption, The Hill reported.

At that meeting, Oklahoma City Mayor Mick Cornett said, "He showed great interest in helping cities progress," according to the Washington Examiner.

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Republicans are looking to lower tax rates and cut out tax breaks, which could lead to issues for state and local governments, according to The Hill.
GOP, Local, Tax Deductions
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2017-17-10
Tuesday, 10 Jan 2017 11:17 AM
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