Clue: County and State projects such as Rail or the Sand Island sewer plant upgrade are financed through discounted borrowing via tax free bonds. If the bonds are no longer tax free, the cost of borrowing for construction for Rail will increase dramatically. California’s Democrat treasurer, Bill Lockyer explains how this would affect his state. In short millionaire’s tax = less CIP. Maybe somebody should tell the Legislature they won’t have as much CIP to pass out.
Jobs Act Could Crimp Muni Bond Market -California Treasurer
News Release September 16, 2011:
California Treasurer Bill Lockyer cited significant benefits to the state from President Obama's jobs bill but cautioned the bill could have significant detrimental effects on the municipal bond market.
Speaking Friday at The Bond Buyer's California Public Finance Conference in Carlsbad, Lockyer said the bill threatens to significantly raise borrowing costs for municipal bond issuers by eliminating some tax exemptions for interest on those bonds.
"The big nit to pick for me is that particular provision to make it more expensive for state and local governments to do issuance," Lockyer said. "It would change the tax-exempt muni market, and there would, in effect, be no such thing as a fully tax-exempt muni bond for a wealthier American."
As presented to Congress, the act would reduce the tax benefit to wealthier Americans in a 35% tax bracket from municipal bond interest, capping the exemption at a 28% tax bracket rate.
Using various calculations and assumptions, Lockyer said that over time the act could add anywhere from $2.7 billion to $7.7 billion to statewide borrowing costs.
"A big question mark is whether any of this will become law, and I think that's a fair thing to be skeptical about," Lockyer said. "The worry I have is that it opens the door to discussion in Washington about the elimination of tax-exempt bonds altogether." ….
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Jobs Bill Muni Tax: