1、 https:/crsreports.congress.gov Updated November 15, 2017Key Issues in Tax Reform: Federal Subsidies for Interest Income Generated from Municipal BondsChanges to tax expenditures have been a core component of several recent tax reform proposals. Tax expenditures are special provisions that move the
2、tax code away from a “theoretically normal” tax system. In most cases, these special tax provisions result in a revenue loss for the federal government. Among the tax expenditures modified by tax reform proposals in the 115th Congress are the exclusions for interest income generated from certain sta
3、te and local bonds. State and local (municipal) governments issue bonds to investors to finance investments in exchange for interest payments and the eventual repayment of the principal (amount borrowed). Current Law The federal government subsidizes state and local debt through three policies: (1)
4、all interest income earned from public purpose bonds is excluded from federal income taxation; (2) a tax credit may be claimed on interest income in lieu of the exclusion in some cases; and (3) interest income earned from qualified private activity bonds (PABs) is excluded from federal regular incom
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