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Eliminating Muni Bond Tax Breaks Getting Bipartisan Support

BY: | Nation | December 12, 2012



Eliminating at least some tax breaks on municipal bond is receiving bipartisan support in the fiscal cliff talks, the Wall Street Journal reports.

President Barack Obama and House Speaker John Boehner, R- have said they are willing to consider nixing the tax break on the bonds for higher-income households, according to the Journal. White House officials have said the federal government misses out on at least $30 billion per year in revenue by allowing the tax break.

Obama’s proposal would put a cap on deductions for singles earning more than $200,000 and couples earning more than $250,000. According to the Tax Policy Center, roughly 85 percent of tax savings goes to households making more than $200,00 annually.

Investors like the break on interest income earned because it gives them more incentive to buy municipal bonds, which typically have lower yields than other investments. For states and localities, the break allows many of them to borrow money at a cheaper rate.

Even if the tax break does not find a place in the fiscal cliff talks, the Journal predicts it will become a part of the discussion next year when Congress is expected to tackle the tax code.


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Liz Farmer

Liz Farmer is a GOVERNING finance writer.

E-mail: lfarmer@governing.com
Twitter: @governing

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