There's an Update on Security for Biden's Gaza Port and a New 'Peacekeeping...
Biden Blows Off Respects for Murdered New York City Police Officer
New York City Councilwoman Gets Ratioed Into Oblivion Over One Question
CNBC: Voters Want Trump to Combat Runaway Inflation
‘No Tampons, No Peace!’: Panic at Vanderbilt University Sit-In As Protestors Realize It...
Comer Urges Joe Biden to Testify As Part of Impeachment Inquiry
A Massive Government Assisted Caravan Is Heading Through Mexico
Americans React to Biden Skipping Out on Slain NYPD Officer's Wake and Instead...
How Does RFK Jr. Affect This Presidential Race?
Judge In Hunter Biden's Tax Fraud Case Doesn't Buy Attorney's Claims
New Poll Shows How Hispanic Voters Feel About Biden Describing Laken Riley's Alleged...
Who Will Replace Mike Gallagher? Poll Shows It's Pro-Trump Alex Bruesewitz’s 'Race to...
Flashback: Two Cycles After Running on Gore's Ticket, Lieberman Endorses McCain at GOP...
Here's When Impeachment Articles Against Mayorkas Will Be Presented to the Senate
Tennessee Music Venue to Host ‘Trans Day Of Vengeance’ Event One Year After...
OPINION

Cut State Debt; End the Muni-Bond Exemption

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
Advertisement
Advertisement
Advertisement

Big government programs and special tax-code carve-outs often lead to corrupting ties between government officials and private interests. The Washington Post today discusses the municipal bond industry:

Advertisement

In just about every election, local governments put measures on their ballots asking voters to allow the sale of bonds so that municipalities can finance roads, schools or other projects. Interested parties often form campaigns to help pass or crush these initiatives.

And sometimes the investment banks that donate to those campaigns get hired to sell the bonds to investors after an initiative passes, raising the possibility that they got a leg up in the selection process because of their monetary support for the ballot bond measure — not because they offered taxpayers the best deal.

…[A] review by the Bond Buyer publication … found “a nearly perfect correlation between broker-dealer contributions to California school bond efforts in 2010 and their underwriting subsequent bond sales.”

…Jay Goldstone, [the] Municipal Securities Ruling Board’s chairman, said he’s concerned about the pattern. “There seems to be a strong relationship between contributions and underwriting business.”

The article discusses solving these problems with greater disclosure and transparency. But the real solution is to eliminate the underlying government preference that creates the influence peddling in the first place.

Advertisement

In this case, the federal income tax exemption for state and local bond interest should be repealed. That could be matched with a reduction in general tax rates on capital income.

As I argue here, state and local governments should dramatically scale back bond issuance. Bonds are just sneaky tax increases. State and local capital investments should be financed “pay-as-you-go,” which would cut out the costly middlemen in the finance industry.

The chart below shows that state and local bond debt has soared to more than $3 trillion. That not only represents a huge deferred tax increase, but it has also created a large playing field for special-interest cronyism. (For chart info, see here).

This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

Join the conversation as a VIP Member

Recommended

Trending on Townhall Videos