House Republicans Hesitant to Alter Muni Tax Status, Price Says

A Republican on the U.S. House’s tax-writing committee said his party is hesitant to curtail the tax exemption for investors in the $3.7 trillion municipal market, which has been a concern among bond buyers.

Debt sold by states and cities generates economic growth and its tax-free status should be preserved, Georgia Representative Tom Price said today at a Securities Industry and Financial Markets Association conference in Manhattan. Price is a member of the House Ways and Means Committee and chairman of the Republican Policy Committee.

“From our standpoint, we are loath to try to harm things that actually generate productivity in the economy, and we believe that tax-exempt municipal bonds actually generate activity out in the real world,” Price said. “I would urge you not to capitulate with a pre-emptive surrender on this.”

President Barack Obama’s budget plan would cap the amount of the tax break on munis for individuals making over $200,000 a year and married couples making over $250,000. Republican presidential nominee Mitt Romney would consider curtailing the muni exemption for top earners, his campaign has said.

Municipal analysts and investors have been speculating as to whether the bond tax break could be scaled back as Congress looks for ways to rein in the U.S. budget deficit.

“Republicans think retroactive tax increases are a disaster,” Price said. “You have at least one individual, and I know a lot of my friends in Washington, who will fight tooth-and-nail against that kind of ridiculous policy change.”

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