Positives and Negatives for Public Finance
On April 10, 2013, President Obama released his FY 2014 budget
proposals. The budget includes $1.8 trillion of deficit reduction
proposals, including $580 billion in additional revenue from
closing federal tax loopholes and reducing federal tax
benefits.
Among the president's proposals to reduce tax benefits is
one that would hit the public finance community particularly hard.
Mr. Obama has again proposed to limit to 28 percent the benefit of
certain tax preferences, including tax-exempt interest. There is no
grandfathering exception — the proposal is to reduce the
benefit of tax-exempt interest on bonds regardless of whether they
are issued after the enactment of the budget or were issued 5, 10
or 20 years ago. This proposal will almost certainly drive up
borrowing costs for state and local governments and 501(c)(3)
hospitals, schools and similar borrowers. It will also leave the
holders of tens of billions of outstanding
