Comprehensive Tax Reform

NATaT Supports Bipartisan Efforts to Preserve the Tax Exempt Status of Municipal Bonds, the State and Local Tax Deduction, and the Home Mortgage Interest Deduction


Tax-Exempt Municipal Bonds
State and local governments have used municipal bonds to build public infrastructure for more than 200 years. These bonds enable communities to access necessary capital for critical infrastructure projects, such as the construction or improvement of highways, bridges, schools, hospitals, water and sewer systems, public parks, ports, airports, and other public works projects. In fact, 75 percent of all national infrastructure projects have been completed using this low-cost, market-driven financing tool. Over the last decade, municipal bonds were used to finance $1.65 trillion in state and local infrastructure investments. NATaT strongly supports preserving the tax-exempt status of municipal bonds.

NATaT also supports legislation that would treat certain municipal bonds as high quality liquid assets (HQLA) when calculating a bank’s liquidity. H.R. 1624/S. 828 would amend a 2014 rule approved by the Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency that established a minimum liquidity requirement for large banking organizations and identified acceptable investments – deemed HQLA – to meet this requirement. All municipal bonds were excluded from the list of acceptable investment categories that can be deemed HQLA. These bills would change that ruling and allow certain municipal securities to be deemed HQLA. Excluding municipal bonds makes them less marketable and will ultimately result in higher borrowing costs for local governments.

Federal Deductibility of State and Local Taxes and Home Mortgage Interest
NATaT supports maintaining the federal deductibility of state and local property and income taxes, as well as the home mortgage interest deduction. Eliminating the deductibility of state and local taxes will make it more difficult and costly for state and local governments to raise revenue for new and crumbling infrastructure and our public schools. The mortgage interest deduction has always been and continues to be a key driver of homeownership. Homeownership is not only a critical component of community building and pride in our towns and townships, but it is also the top savings vehicle for American families and a vital component of local government revenue.


To learn more, download the full policy paper.