LETTER: The National League of Cities Endorses Lance-Gottheimer Tax Plan

The following December 6, 2017 letter by Clarence E. Anthony, CEO and Executive Director National League of Cities, went to the Honorable Mitch McConnell, the Honorable Paul Ryan, the Honorable Charles E. Schumer, and the Honorable Nancy Pelosi.

Dear Majority Leader McConnell, Minority Leader Schumer, Speaker Ryan and Minority Leader Pelosi:

On behalf of 19,000 cities and towns across the country, the National League of Cities (NLC) writes to urge you to consider and adopt the provisions of an amendment submitted by Representatives Lance and Gottheimer to improve the Tax Cuts and Jobs Act (H.R. 1).

While we are gracious that certain key priorities for cities — including the tax exemption for publicly issued municipal bonds — were protected in both versions of the bill, we remain deeply concerned that provisions found in both versions will have tremendous repercussions for middle class families and the cities in which they live. The Lance-Gottheimer amendment offers a bipartisan solution to resolve many of our concerns.

The amendment proposes a reasonable balance of pro-growth tax reforms and preservation of the existing pro-growth policies and tools, including the state and local tax (SALT) deduction and bonds. We urge Congress to support the amendment as it would:

• Fully reinstate the state and local tax (SALT) deduction. As currently prescribed in both versions of the bill, eliminating or capping the federal deductibility for state and local property, sales and income taxes would represent double taxation, as these taxes are mandatory payments for all taxpayers. More than 43 million American taxpayers in all 50 states claim this deduction, which is currently the most used deduction in the federal taxpayers. Of these claimants, nearly 87% have an adjusted gross income (AGI) under $200,000. States and local governments deploy revenues from state and local property, sales and income taxes to help finance long term infrastructure projects, local law enforcement, emergency services, education costs and many other services. By eliminating the federal deductibility of these taxes, Congress would also be shifting the intergovernmental balance of income taxation and would thus limit state and local decision-making in our tax systems. For more information on how SALT benefits American taxpayers and cities, visit www.nlc.org/SALT.

• Fully protect the tax exemption on Private Activity Bonds (PABs). Taxexempt private activity bonds (“PABs”) represent a critical source of financing for important qualified projects and programs, including infrastructure, affordable housing, economic development, the funding and refinancing of student loans, and much more. PABs help spur private investment and allow state and local governments to harness the private sector’s experience and expertise toward public projects and initiatives, and therefore should be preserved and enhanced.

America’s cities and towns cannot afford or support the current versions of the Tax Cuts and Jobs Act (H.R. 1) passed from both chambers. We recognize that our tax code is in need of simplifications, but offsetting the cost of this tax plan onto America’s state and municipal governments cannot be an option. We believe that the Lance-Gottheimer amendment is a feat for bipartisanship and a major step in the right direction toward creating a simpler, fairer tax code.

We also hope the conference committee will review the December 31, 2017 phase out of the tax exemption for advance refunding bonds. Such an immediate revocation would cause unintended consequences to city finances. We urge Congress to reconsider elimination of this critical refinancing tool for cities.

If you have any questions or concerns, please reach out to my colleague, Brian Egan at egan@nlc.org.

Sincerely,

Clarence E. Anthony CEO and Executive Director National League of Cities

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