ASA Highlights New Academic Report on Municipal Bond Tax Exemption

WASHINGTON – The American Securities Association (ASA) is today bringing attention to a newly released academic report that sheds light on the federal tax exemption on municipal bond interest, one of the most vital tools for financing public infrastructure. 

 “The municipal bond tax exemption is a lifeline for communities across America and plays a vital role in affordably building for the future,” said ASA President and CEO Chris Iacovella. “Before Congress considers updating its tax policy, we urge policymakers to use this academic report as the foundation to make educated decisions on a key component of infrastructure financing.”

The report, published by the Lyndon B. Johnson School of Public Affairs at The University of Texas at Austin in collaboration with the University of Chicago’s Harris School of Public Policy, provides policymakers with an essential guide to understanding the historical context, economic rationale, and potential reforms surrounding this critical financing mechanism, offering a comprehensive analysis of how municipal bonds underpin infrastructure development across the United States.

Key Insights from the Report

The report highlights several key findings that underscore the importance of preserving this tax exemption:

Role in Infrastructure Financing: Municipal bonds are integral to funding U.S. infrastructure projects, with $4.2 trillion in outstanding bonds supporting critical investments across communities. 

Cost Savings: Federal tax exemptions have saved state and local governments $714 billion between 2000 and 2014 and are projected to save $824 billion over the next decade. 

Impact on Borrowing Costs: Removing the exemption could increase borrowing costs by up to 40%, disproportionately affecting smaller issuers and regional governments. 

Private Activity Bonds (PABs): While some criticize PABs for subsidizing private enterprises, they remain essential for underserved communities, financing projects like affordable housing and public-private partnerships. 

###

The American Securities Association (ASA) represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.