NACo paper explains importance of municipal bonds.

• Position: News & Numbers - National Association of Counties

Counties, states, and other localities are the main funders of infrastructure in the United States. Municipal bonds enable state and locals to build essential infrastructure projects such as schools, hospitals, and roads.

Congress is debating federal tax reform, including a cap or a repeal of the tax-exempt status of municipal bond interest. The National Association of Counties' analysis of the municipal bond market and of the estimated impact of a 28 percent cap and a repeal of the tax-exempt status of municipal bond interest on the 3,069 county governments in the United States reveals that:

* Municipal bonds finance a range of locally selected infrastructure projects and have a long history of low default rates. Between 2003 and 2012, counties, states, and other localities invested $3.2 trillion in infrastructure through long-term tax-exempt municipal bonds, 2.5 times more than the federal investment. In counties, the legislature of the county government has to approve a bond issuance, and often voters also approve the bond financing. Municipal bonds maintain a track record of low default rates, better than comparable corporate bonds.

* Any tax imposed on currently tax-exempt municipal bond interest will affect all Americans, as investors in municipal bonds and as taxpayers securing the payments of municipal bonds. American households hold almost three-quarters of the municipal bond market, for retirement plan diversification and as a way to invest in their communities. A cap or repeal of the tax-exempt status of municipal bond interest would deeply affect Americans' retirement nests and asset formation. At the same time, the higher debt service would affect counties and other state and local governments' budgets, and directly affect taxpayers.

* In 2012 alone, the debt service burden for counties would have risen by $9 billion if municipal bonds were taxable over the last 15 years and by about $3.2 billion in case of a 28 percent cap. Large counties (those with more than 500,000 residents) would have borne more than half of the cost, and small counties would have been most...