Obama's Municipal Bond Proposal Abrogates Contracts

Sfgate - Sept. 19 (Bloomberg) -- President Barack Obama's plan to cut the budget deficit repeats his call for curbing the tax exemption on municipal bonds and would give states a break on unemployment debts owed the federal government. The recommendation includes tax overhauls proposed last week that would limit exemptions for interest on state and local government bonds for those earning $200,000 or more. While that may push up municipal borrowing costs, Obama today proposed giving states that have run out of money for unemployment benefits two more years of interest-free loans. The ideas are part of a package Obama submitted to a Congressional panel seeking to cut $1.5 trillion from the deficit in the next decade. By pressing for tax increases, mostly aimed at the wealthy, he places himself at odds with Republican leaders who want to focus on scaling back spending. Any push to reduce the tax-exemption on municipal-bond interest may also face resistance from local government officials coping with fiscal pressure from the recession and a loss of federal stimulus money. California Treasury Bill Lockyer last week said losing part of the tax break might cost California as much as $7.7 billion. Read full story here: News New Mexico

Obama's Municipal Bond Proposal Abrogates Contracts