Quote:
Originally Posted by Busy Bee
Ok this might get a bit wonky, but is there a way that a municipal tax could be guaranteed by the federal gov't which would create a mechanism to issue bonds so the money could be accessed up front instead of spread over decades?
|
What do you think a bond is? Municipalities can already issue bonds. If they partner that with a new dedicated tax, the bond will get a better rating since the rating agencies feel more comfortable about the ability to repay.
The problem is that municipalities also have to pay interest on bonds, which siphons off a portion of the tax proceeds and means that there is ultimately less money available for the municipality to access. This interest comes to the bondholders as income, which is taxed by the Federal government.
30/10 was ultimately an effort to create a new class of bonds where the boldholders would be exempt from taxes on the bond income. With the tax exemption, investors would pay more for the bonds upfront and allow Metro to ultimately use a greater portion of the sales tax proceeds.