Commentary: Tax Reform and the Implications for State and Local Bonds

It would be tempting to simply ignore the current discussion of tax reform. Generally, the proposals call for large rate reductions, with the cost of the rate reductions being offset by repeals or limitations of unspecified tax expenditures. The offsetting revenue increases pose difficult political choices because the math is clear: there are not enough special-interest benefits to finance a significant rate reduction. Those political choices are not even acknowledged today because of their potential unpopularity. There is no reason to believe that the choices become easier after the election. There is little doubt that repeal of housing tax benefits would lead to further reductions in housing prices, threatening real property tax revenues. In short, it is time to be engaged in the debate.

Bond Buyer

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