Tax-Exemption Efforts Send Lobbyists Scrambling

The Bond Buyer reports:

State and local government groups are launching campaigns to protect the tax-exempt interest for municipal bonds against cost-cutting efforts in Congress.

Lobbyists representing states, cities, development banks, and other muni issuers are eyeing an upcoming debt-ceiling resolution as a possible showdown in which tax expenditures could be threatened. These issuer groups are also watching the fiscal 2012 budget proceedings as an avenue for lawmakers to cut tax expenditures as a way to rein in the federal deficit.

The tax exemption for munis has drawn scrutiny from both Democrats and Republicans so the outreach effort crosses party lines, sources said. Democrats believe the tax exemption for municipal bonds benefits wealthy individuals. Some issuer groups said they worry a cut in the tax exemption may be an easy point of compromise for Democrats.

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