MMA joins NLC, other municipal leagues urging Congress to protect key deductions in tax reform

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The MMA today joined 21 other state municipal leagues and the National League of Cities in urging members of Congress to preserve the state and local tax deduction, known as SALT, in any federal income tax reform bill, and to reject the current version of the legislation.
 
The NLC and the state municipal leagues are calling on local officials across the country to contact their members of Congress and urge them to protect local taxpayers by preserving the SALT deductions as well as the Historic Tax Credit and all tax-exempt bonds.
 
In a letter to members of Congress, the municipal leagues state: “Unfortunately, this Act asks cities and towns to do far more with far less. We recognize that our federal tax code is in need of simplification, but offsetting a tax plan on the back of municipal governments should be rejected.”
 
In the coming days, both chambers of Congress will take initial votes on a wide-ranging federal tax reform bill. The current bill would eliminate almost all of the SALT, cap property tax deductions, eliminate the deductibility of certain municipal bonds, and eliminate the Historic Tax Credit.
 
MMA Executive Director Geoff Beckwith said the tax reform debate on Capitol Hill “will have real implications for local taxpayers and municipal finance in Massachusetts.” He added that the bill that the U.S. House of Representatives is expected to debate next week “contains provisions that would increase the tax burden on middle-class taxpayers in our state and remove important municipal finance tools to build local economies.”
 
• Ending SALT deductions would violate a 104-year promise by the federal government against double taxation. More than half of Massachusetts’ taxpayers deduct state and local taxes, Beckwith said, and these taxpayers would see a significant increase in their tax burden under the current proposal.
 
• Eliminating the Historic Tax Credit would harm investments in communities, particularly in states such as Massachusetts with many older buildings and factories in need of preservation and redevelopment.
 
• Capping the property tax deduction would be especially painful in states like Massachusetts, where more than two dozen communities already have average property tax bills that are higher than the proposed cap of $10,000. Capping this deduction, the municipal leagues argue, would make it harder for communities to fund essential services such as public schools, police and fire services, and infrastructure.
 
• Revoking the tax-exempt status of Private Activity Bonds and eliminating Advanced Bond Refunding would damage local finances and economic development. Private Activity Bonds are an important tool used to leverage private investment in much-needed local housing and economic development projects. Advanced Bond Refunding allows taxpayers to refinance and save money on municipal bonds during economic downturns.
 
The MMA opposed these provisions in a press conference last week with U.S. Sen. Edward Markey after Congressional leaders released their plan.
 
“Changes to tax policy should be balanced and well thought out,” Beckwith said, “which is why the MMA has joined with a wide range of nonpartisan groups to protect cities and towns, including the National League of Cities, the National Governors Association, the National Conference of State Legislatures, the International City/County Management Association, the U.S. Conference of Mayors, and the Government Finance Officers Association.”
 
Read the letter to Congress on this issue from the NLC, MMA and 21 other state municipal associations (336K PDF)
 
Link to the National League of Cities website for its statement opposing the elimination of SALT deductions