7 Reasons Why Municipal Bond Tax Exemptions are Under Threat and Why We Should Fight Back
As the political climate shifts, the urgency for municipal bond-issuing entities to advocate for the preservation of tax exemptions on municipal and private activity bonds is more pressing than ever. With members of the House Ways and Means and Senate Finance actively negotiating a substantial tax package, the stakes have never been higher. It’s in this critical window that city and state officials must mobilize their resources and rally their arguments. We can’t afford to sit on the sidelines, hoping that someone else will champion our cause; instead, it’s time to step up and demand that our voices be heard loud and clear.
In-person advocacy is crucial. Jarrod Loadholt of Ice Miller LLP emphasizes that the moment for local officials to make an impact is now. They can no longer rely solely on lobbyists or external advocates; local representatives bring a weight of credibility and relevance that can’t be substituted. Each community must make it abundantly clear that they have a lot to lose if these tax exemptions disappear.
The Realities of Lobbying in Washington
It is disconcerting to see how fragile these tax exemptions have become, particularly under the scrutiny of a Congress that is perpetually in search of revenue-generating measures. There’s an unsettling irony in how lawmakers are willing to jeopardize vital community development finance tools while simultaneously promoting local initiatives that enhance economic growth. This political paradox reveals that advocacy and lobbying are not merely about presenting data; they are about forging relationships and highlighting the local impact of policy decisions.
Toby Rittner, president of the Council of Development Finance Agencies (CDFA), points out that they find themselves “in a pretty precarious position.” This statement captures the essence of the struggle against the backdrop of a government increasingly at odds with local interests. Rather than being a neutral player, the CDFA is being compelled into a defensive stance, contending with an administration that has consistently dismantled supportive federal programs.
Local governments, educational institutions, and healthcare facilities that depend on these tax-exempt bonds can’t afford to be passive observers in their fate. This is a moment for collective action, where local advocates can leverage specific case studies to appeal directly to their representatives in Washington.
The Tangible Impact of Policy Changes
Privately Issued Bonds (PABs) play a significant role in financing pivotal infrastructure projects, ranging from airports to charter schools, and even hospitals. In fact, airports alone issued an astonishing $22 billion in 2024. This demonstrates the far-reaching implications of these tax exemptions, as they serve as a lifeline for many entities that form the backbone of our communities.
Yet the current administration seems more intent on regulatory constraints than on recognizing the benefits these bonds provide. Limitations such as annual volume caps and state allocations have already stifled the potential for issuance. One has to wonder: at what point does the cost of government overreach outweigh the supposed benefits?
If legislators don’t receive tangible evidence of these impacts—projects that will either flourish or falter based on tax policy—they may easily overlook the nuanced yet critical discussions surrounding PABs. Advocates must arm themselves with data that showcases local ramifications, not just abstract numbers that may not resonate. The local connection is powerful; it’s not about lobbying in Washington but about storytelling that makes representative offices take notice.
Universality of the Fight
It’s important to note that the fight to preserve tax-exempt bonds is not purely a partisan issue; it affects communities across the political spectrum. With representatives from both sides acknowledging the call to protect local interests, there is a considerable opportunity for bipartisan support. Nevertheless, factions within Congress may be tempted to view policies solely through a revenue lens, disregarding the human and community aspects of such decisions.
Local voices must rise, galvanizing fellow citizens to illustrate just how their local landscapes would deteriorate without these financial supports. Rittner’s observations underscore this need: “If they don’t hear from you and don’t have a visible physical repercussion, they will not raise their hand in those meetings.” This is an urgent rallying cry for advocates to take action.
Failure to galvanize support risks not only obstructing future projects but stunting current ones that depend on these vital financing tools. We are witnessing an unnecessary erosion of local progress that hinges precariously on the decisions made in Washington. It’s time to not just advocate but to demand a future that recognizes the importance of community development, sealing our tax-exempt bonds as tools for progress rather than casualties of political maneuvering.
