The Connecticut Conference of Mayors strongly opposes Federal taxation of interest on municipal bonds. This exemption is essential, if municipalities are to provide badly needed public facilities and to prevent further deterioration of their serious financial condition. Municipalities in Connecticut, as in other States, are trying hard The interest on bonds for such facilities is one of the largest bonding costs us about $500,000 over the life of our 20-year bonds. In Connecticut, for example, municipalities completed $60 million in school construction projects last year - projects taking care of some 35,000 additional children. The Interest on these schools alone will be roughly $15 million to the cities and $15 million to the State. Add to that the libraries, roads, police stations, and other facilities we have built and need to build, and the cost is immense. These costs are difficult enough for cities to meet. Taxation of municipal bonds will result in higher interest rates. Wall Street municipal bond experts advise us that communities now paying from 5 to 61% will have to pay 8 to 81% interest to compete with corporate bonds. Communities with weaker financial structures including some of those may have to pay as much as 10 or 11%. Municipal bond experts advise us that fear of the legislation before your committee has already caused a 1% increase in the rate at which municipal bonds are now selling. Higher interest rates will mean higher local taxes, bearing most heavily on those who can afford it the least. Our The situation is particularly difficult in Connecticut. municipalities are straining to find adequate sources of revenue. Yet our cities must rely exclusively on the overburdened property tax. The State of Connecticut pays a smaller proportion of our local costs than In 45 other states. The property tax bears the rest. The Federal and State governments should be helping cities solve urban problems, not adding to our burdens. It is unfair to single out municipal bonds for "reform" while other tax loopholes continue to exist. We should be getting more financial assistance, instead of being penalized. 162 We therefore strongly urge you not to include taxation of municipal bonds in the bill your Honorable Committee will report. A copy of the resolution passed unanimously by the members of the Connecticut Conference of Mayors is attached. 163 WHEREAS, local property taxes are much too high, and as a result, municipalities are unable to provide all the needed services, and WHEREAS, increasing the cost of financing schools, sewers, streets, and other very badly needed public facilities, through taxation of munic- WHEREAS, the Connecticut Conference of Mayors believes that every WHEREAS, taxation of municipal bonds will add further to the financial burden of all municipalities, and WHEREAS, it is completely unreasonable to single out municipal bonds for "reform" while many other exemptions, favorable tax treatments, and loopholes will continue to exist, NOW THEREFORE BE IT RESOLVED that the Connecticut Conference of Mayors vigorously opposes Federal taxation of interest on municipal bonds. September 18, 1969 164 STATEMENT OF IRWIN KARP COUNSEL, THE AUTHORS LEAGUE OF AMERICA BEFORE THE COMMITTEE ON FINANCE UNITED STATES SENATE, 91st CONGRESS, 1st SESSION 1. The 50% tax limit would not apply to authors, dramatists 2. The 50% limit was intended to apply to income earned by a taxpayer's personal efforts as distinguished from income produced by the use of capital. An author's income is 3. "Earned income" should be defined to include income derived by an author from the disposition of rights to use his works [as in Sec. 401 (c) (2) (C) (IRC)]. 4. The 50% limit would provide a more equitable tax rate and 1. Sec. 1301 (IRC) does not provide equitable taxation of an author when his income from one or two works, resulting from the creative effort of several years, is concentrated in the upper brackets of one or two tax years. 2. Section 1301 should be revised to permit the use of 3 alternative base periods for "income averaging"; the extent to which current income must exceed the average of a given period to increase in relation to the length of the period. -00000 165 |