Madison finance committee backs resolution to preserve federal tax exemption for municipal bond interest

The Madison Finance Committee unanimously adopted a resolution on May 27, 2025, declaring the city’s support for preserving the federal tax exemption on interest from municipal bonds after a briefing from the Government Finance Officers Association.

The resolution, introduced as Legistar 87963, was presented to the committee following a primer from Emily Brock, director of federal policy at the Government Finance Officers Association (GFOA), on how proposals in current congressional budget negotiations could target the tax exemption as a pay-for. The committee moved and seconded the resolution and recorded a unanimous vote in favor.

The exemption is a long-standing federal tax treatment that lets investors exclude interest from municipal bonds when calculating taxable income. Brock told the committee that eliminating or curtailing the exemption is one of the revenue options being considered in 2025 budget reconciliation work in Congress and that policy changes could raise an estimated $470 billion over 10 years if the exemption were repealed. Brock said the municipal bond market underpins most U.S. infrastructure financing: state and local governments pay about 75% of the costs of public infrastructure, and GFOA analysis estimates municipal issuance saves about 200 basis points (2 percentage points) for borrowers compared with taxable alternatives.

Brock used a local example to illustrate stakes: the Madison Metro bus rapid transit project used roughly $30 million of tax-exempt bonds as part of a roughly $200 million project; GFOA’s BuiltByBonds map also highlights that project and others to show members of Congress concrete community impacts. She said national estimates show the federal cost of providing the exemption is roughly $400 billion over a decade and that, according to some studies cited in her remarks, removing the exemption could translate into about $6,500 in higher taxes and fees per household nationally.

Committee members asked how the municipal bond issue intersects with proposals to change the state and local tax deduction (SALT). Alder Evers asked specifically whether SALT negotiations overlap with municipal bond policy; Brock said advocates have had to educate policymakers that SALT is a revenue‑side change while municipal bonds are a capital‑finance tool and that the 2 are not direct tradeoffs for municipal finance. Alder Figueroa Cole asked whether the resolution would be shared with the city’s lobbyist and congressional delegation; staff confirmed it would.

The resolution will be distributed to the city’s federal contacts and lobbyists to indicate Madison’s position as Congress continues work on the budget and potential tax changes. Committee materials and Brock’s slides, as presented, emphasized the GFOA’s advocacy focus on preserving the exemption and on providing stories and data to members of Congress to explain local infrastructure projects financed with tax‑exempt bonds.

The committee did not adopt any additional policy changes at the meeting; the action recorded was the adoption of the resolution expressing municipal support for retaining the federal tax exemption on municipal bond interest.