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245160 � 24516� a OR161NAL�TO CITY CLERK ' CITY OF ST. PAUL couNCi� NO. - . • OFFI OF THE CITY CLERK FILE C N IL S LUTION—GENERAL FORM PRESENTED BY -� CO M M I551 ON E DATF WHEREAS, The Municipal Finance Officers Association of the United States and Canada concluded its 63rd Annual Conference in May of 196g, at Toronto, Canada; WHEREAS, During the conference, special emphasis was directed toward attempts to deprive state and local govern.ments of the "tax exempt" status of their bonds, and WHEREAS, The House Ways and Means Committee has tentatively agreed to indirectly tax the interest on tax exempt municipal bonds through the minimum income tax and allocation of deductions mechanisms, and WHEREAS, The �ffect of the deduction allocation and minimum tax mechanism will be to construct substantially the market for tax-»exempt securities, to increase the cost of capital financing for localities; BE IT RESOLVED, That the Council of this City does hereby re— • cognize the dangers of such indirect tax on tax exempt municipal bonds as it would effect local governments, and does hereby firmly express opposition to such proposals, and � BE IT FINALLY RESOLVED, That this Council directs the City � lerk to sendcopies of this resolution to each senator and re-. p resentative from Minnesota in the United States Gongress and to a�.� the chairman of the committee on Ways and Means, Honorable Wilbur D. Mills and prays that each will do all in his power to protect and � preserve the tax exempt status of state and local govern.ment bonded O debt obligations. 1�1UG 61969 COUNCILMEN Adopted by the Counci� 19.— Yeas Nays �arlson AJG 619�� , Approve —19—_ �Vleredith �� Q �n Favor � ,�� -`--�°��-- i" Acting Mayor ��-5prafka / � A gainst � �edesco � ��v��s dent, Dalglish �96� PUBLISHEa AUG 9 O �' ' .' � a �S � l� u � OFFICE OF TH COMPTROLLER SAINT PAUL MINNESOTA 55102 I ALL JOSEPH J. MITGHELL �� JOSEPH P. LA NASA CITY COMPTROLLER DEPUTY CITY COMPTROLLER August 6, 1969 Honorable Mayor and Members of the City Council Gentlemen: The Municipal Finance Officers Association is again bringing to the attention of its members the proposal now before the House Ways and Means Committee to eliminate the tax free status of municipal bonds. In discussing the impact of "tax reform" proposals on the Municipal Bond Market at the recent finance conference in Toronto, the following comments were made: "The inclusion of tax-exempt interest on state and local bonds in any of the pro- . posals (minimum tax, limit on tax preferences, allocation of deductions) can lead to a serious adverse impact on the municipal bond market. This is a very large market and an important part of our total capital structure; tampering with it would be extremely hazardous. . . . . . ." "Investors in these securities bought them in the belief that the income wou�d never be taxed by the Federal Government. Once this principle is breached, there is theoretically no limit to the extent to which they could then be taxed by suc- ceeding Congresses. More than any other sector of the security markets, the market for bonds of state and local governments is based on belief in the good faith of Government at all levels. Any change in the tax status of these bonds would in our opinion irreparably damage investor confidence, with far reaching effects on the , cost of future local government financing. Consideration also should be given to the impact of such action on the value of outstanding municipal bonds and the capital losses on them which necessarily would be sustained by thousands of banks and other financial institutions, as well as individual investors. This would be a serious miscarriage of the intent to improve equity in taxation. "Putting this matter in proper perspective, tax exemption is not simply a gift from the Federal Govern�ent to certain investors. It is a quid Pro yuo for the accep- tance of lower rates of return than the investor could obtain on alternative in- vestments. Here is a major and I think conclusive thought on this point. The mini- mum income tax proposal purports to be an attempt to reach tax sheltered income at roughly half the regular income tax rates, that is up to 30% or 35%. An investor in tax-exempt bonds has accepted close to one-third less incocQe than he could re- ceive from taxable obligations -- that is what he has paid for the tax exemption. Thus in a very real sense, and certainly in terms of equity, the investor in tag- exempt bonds has already paid his minimum income tax and has paid it in advance. . . . . . . ' � �� ;� .. . � . • ' Honorable Ma.yor and Members of the City Council Page 2 August 5, 1969 "Your immediate problem is to ma.intain the integrity of the present tax-exempt market. This is your market. Only you and your associates can make it clear to your Congressmen that it should be protected and that you have an important stake in its protection. You can emphasize to them the dangers to this market which would flow from inclusion of tax-exempt bond interest in either a minimum income tax scheme or an arrangement for allocation of deductions. You can say to them 'The tax-exempt market provides us with an effective and advantageous vehicle for financing public capital projects, and we regard our financial independence as an important feature of our federal system of government. The horror stories about non-taxed wealthy individuals were based on figures which did not include tax-exempt bond interest and they give you no reason to strike at us. .. . . ' . . . . .�� With these pertinent remarks in mind, it would appear appropriate that a resolution of this Council should be sent to our Senators and Representatives and to the Chairman of the House Ways and Means Committee. Respectfully submitted, V �� Joseph J. Mitchell City Comptroller ,:..,�r ....� -��/ b � � 10HN A.BLATNIK . ' Con�M�rr�s: STN DISTRICT,MINNESOTA '� y � PUBLIC WORKS . .r � GOVERNMENT OPERATIONS � RooHt 2149 RAYBURN HOU56 OFPICE BLDG. �ot�gre�� o� t�je ��cite� �ta�te�, �ou�e of �.te�regetttati�e� �a�jtngtott,�.G�. August �+, 1g69 Mr. James Ualglish, Cornmi.ssioner Department of Finance, 113 Court House City of St. Paul, Minnesota 55102 Dear Ji�.: I have recently received a copy of your letter to Congress- man }3i11 Green, regardin� the taxation of interest on muni- cipal bonds. I want you to know that I share your concern. I have been in contact with the Ways and Means Committee on this and several other issues which could do much harm to our small scale financial bodies, and means of finance. The Committee on Friday reported out a bill on tax reform which is to be considered late this week. Generally, the provisions relating to taxation of municipal bond interest provide that state and local governments are to be given an opportunity to issue taxable obligations and in turn receive from the Federal Government a payment equal to between 30 and 40� of the interest yield of the bond. As I understand this proposal, this is somewhat in line with your suggestion to Mr. Green of subsidization of municipal bond interest. I a.m aware that taxation of municipal bond interest �rorks a disadvantage to the local government, in that it removes in- centives to investors to use their capital to support mllnicipal projects. This bill, however, is as fair as possible to all parts of the American taxpaying public, Since it is so complex must be considered as a whole, and defeated or passed as a complete package. Hence, I hope that this provision will not work too great a disadvantage to local governments. �ank you for taking the time and trouble to contact the Committee. Please feel free to-write me whenever I may be helg ful on legislation of interest to you. With every good wish. Sinc ely yours, C�',�_ I, ►�,.y � J��n A. Blatnik, M.C. JAT3:mc . :.sR�;•,. �' ORISINAL TO CITY CLLRK ��+-�✓O r � " CITY OF ST. PAUL � couNCi� NO OFFI�E OF THE CITY CLERK �"E� l C UN IL ��5 LUTION—GENERAL FORM PRESENTED BY /- 1�� '�-. � tY�l COMMISSIONE \ DATG / � ` WHEREAS, The Municipal Finance Officers Association of the United States and Canada concluded its 63rd Annual Conference in May of 1969, at Toronto, Canada; WHEREAS, During the conference, special emphasis was directed toward attempts to deprive state and local governments of the "tax exempt" status of their bonds, and WHEREAS, The House Ways and Means Committee has tentatively agreed to indirectly tax the interest on tax exempt municipal bonds through the minimum income tax and allocation of deductions mechanisms, and . WHEREAS, The �ffect of the deduction allocation and minimum tax meehanism will be to construct substantially the market for tax—exempt securities, to increase the cost of capital financing for localities; BE IT RESOLVED, That the Council of this City does hereby re— • cognize the dangers of such indirect tax on tax exempt municipal ' bonds as it would effect local governments, and does hereby €irmly ` � �'� express opposition to such proposals, and � �I BE IT FINALLY RESOLVED, That this Council directs the City � � lerk to sendcopi.es of this resolution to each senator and re� p �presentative from Minnesota in the United States Congress and to o�,� , �a the chairman of the committee on Ways and Means, Honorable Wilbur D. � v Mills and prays that each will do all in his power to protect and .s preserve the tax exempt status of state and local government bonded O Q debt obligations. AUG 6 1969 � COUNCILMEN Adopted by the Council 19— Yeas Nays �arlson -� /�►�G b �� Approve 19—_ . �iVleredith J �n Favor � . � ' , �; /� ,� �terse�- � � �Sprafka Acting Mayor � A gainst � �edesco �Mr-�'reSident;B�rrr� ' Mr. Vice President, Dalglish a�� . - � y�—�� e ° EUGENE J. MCCARTHY � COMMITTEES MINNESOTA FINANCE • , �'Zi IC�r�cYf.e� .$fafe� ,�ier�c.afe FOREIGN RELATIONS WASHINGTON, D.C. 20510 August 14, 1969 Mr. Harry E. Marshall City Clerk City of St. Pau'I. 386 city Hal'I St. Paul� Minnesota 55102 Dear Mr. Maxshall: I appreciate hearing from you concerning the taxation of sta,te and local bond interest. The Senate Ca�unittee on Fina,nce will begin hearings September 4 on the Tax Reform Act oY 1969 approved by the House of Represerrtatives. As the Canmtttee and the Sena.te consider proposed changes in the 3n�come tax laws� I will have in mind your comnents and recoamer�dations with respect to sta,te and local bonds. With best wishes. Sincerely yours, � Eugene . McC hy . EJM:mgr ANCHER NELSEN COMMITI'EES: l HVTCHINSON.MINNESOTA INTERSTAT6 AND FOREIGN COMMHRCE DISTRICT OP COWMBIA 2�D�snt�CT Courvrves: BLUE EARTH MURRAY � OFFICE: CARVER NOBLES� �Cor�gre�� o� t�je ?�t�cteb �tate� ROOM 2529 CO'ITONWOOD PIPESTONE RNY9URN OFPICE BUILDIN6 FARIBAULT ROCK �pu�e of �e�regentatibeg T6L6PHONE:225-2472 JACKSON SCOTT LESUEUR SIBLEY MCLEOD WASECA ��y�j��Myy'�715•[�• �0515 MARTIN WATONWAN 9i�� w�` �� `r August 11, 1969 r9r. tlarry F:. A�arshall City Clerk Bureau of Records 386 City Hall St. Paul, Minnesota 55102 Dear I�9r. Marshall: I appreciated receiving your recent communication on the proposed revision of the tax treatment of interest from municipal and state bonds. As yau may know, the ti9ays and Means Committee recommended to the House, H.R. 13270, the Tax Reforr.i Act of 1969. Unfortunately, the bill was brought before the f�ouse under a "closed rule" iahich prevented consideration of amendments except a motion to recommit. The bill as passed by the f�ouse on August 7 contained a revision of the tax treatment which would begin as of July 11, 1969. I am enclosin�; photo copies of the relevant pages of the report for your reference. At this time, the Senate Finance Cotnmittee is beginning to consider various tax reform measures, and it is expected that the House-passed version of the tax reform bill will be changed consid- erably in the Senate. I know there is a good deal of dissatisfaction with the Iiouse- passed version, and I will keep your sentiments in mind when the conference report comes before the EIouse. Kindest regards. Sincerely yours,, f ��-- "' ; .1 . � C�: G/��lC�� Ailcher Nelsen Membex o� Congress AN:sr Enclosure . w. r-. � -� � � � . . I _ 1� Y. raa �� or� aTSa� exn �cvxictreL Boxne (9eos. 801 and 602 of the bill and sec. 108 of t,he oaie) Pretent"Zaio.—Preee�zt law provides thst interest on obligationa of , Ststs and locsl governments g�enersll y, is eaem�t from Feder�.l incoin�e taz,an eaemption that has been provided ever since the Federal inoome taa wss sdopted in 191�. Intsreet paymenta o�obligstiona isened by the IInited Statee sfter , Septsmber 1,1917,are sabject to Federal tsa,in oontrsst with intrrest on Stste and local government obligationa � Stste and.loc41g�overnmente generully do not directly tsa intare�t ' on Fede�rssl bonds, but they taa the intereet inoome on bonds issued - by other Statee. 30�Stst� ' se their income taa as a perc�►te�e of tl�e Federal income tsz liab�y, and in thees cases t�e State�, in e$ec�t, are tsaing income on Fede�sl bonds. The$exeaue e►nd Ezpenditure Control Act of 1968 withdrew taa- ea�mpt etatns from industrisl revenue bonds which State snd local g�overt�mente were uaing to finanoe snd at�ract private indnstrial devel- opment witl�in their juriedictions. .This legislstion appd�e g�enerally to industris1 development bonda i�ued after April 30,.1988, and was inte�dAd to prevent States and locx►1qo vernments from abusin� the ' tsa-eaempt atstus of their obligations bJ nsing it as a basis for mter- eR�te oom tion bo attr�ct indastry. The leg�slation, however, was not i��1�se an attsck or limitation on the g�eneral pnneiple of taa ezemption for State and local governm�eirt obli�ationa ' Tl�ere atw presentl,y no other epecific restriotions in the code upon , theee ts=-eiempt obligations, nar upon the uee of t�e proc�eds from theur i�ssue. � . Althongh the pregent legal baeis fi�r the ezeanptian of ir�teraet on 8tat�s�local obligstions frora the Federal inoome taz is found only is eeotioa 10��s) of the.code,thcre is a body of opinion to the eHect thst it aould be unoonstitutional for the Federal C�ovea�nment to tsa interest lrom.State and local obli�ations without the oonsent of tihe itaning vernment8. It slso is ms;ntained that the ezennption is part of a�syete�n of g�overnment under which the Federsl (�overn- ment does not infringe on the powers of the State and locs,l govern- me�ta. Thie position hss been dispn#ed, and many suthorities have indiaated that#.he Federal QovernmeQit does have s canetitntional right fin taa the inte�on State snd la�,�l eecuritiee. . (�enernl reafao+u for chav�ge.---Capital outlsys of State and lo� ' �o�ernmente for such projeds as schools and ather public buildin�, }�ighwsys, wa,tsr and sewage sy�tems, and antipollu�ion fscilities hsve donbled during the pset decade.In order to markelt sn increseang volume of securities to finance theee public projects in competi�ion . with a growing volwne of privxts borrowings�,S�tate and local govem- ments have been offering higher yields, and the di$erentisl between taa-ezempt and taaable securities of comp�rdble quali�ty has bean narrowing. Historically, the ratio of yields on taz-eaempt iesues to taaable issues has been as low as 60 percent,but in reoent yea.rs i't h$s been clase to 75 percent. . .. .�: , <�Yt.,...X�lr. . �.....ca..,.W-=—=�r��"".��a�.�.u.:. � ... � . � � - - -- . . � � � . 1�3 . � Tl�e ral�ao of ds hae v�ried inr�ponse to the genesal svailability 'o of cred.iL, tLe for eredit and the prnportionate demand by State and local governments to the �total market demand for cre�'i� As a result, high u�come individuals and institutiona otherwisg eub- ject to high taz rates who constitute a major portion of the market for tas-eaempt St�te and local eecurities hsve been reoeiving significantly lar�er taz benefits tha,n needed to bring them into the market. Rscent est�mates pl�the annual sading in iirterest chs�rges to Stste and local . g�overnments at�1.3 billion,bat the wnnual revenue loes to t�e Federal (3overnment has been e�stimated at$1.8 billion. Several procedures have been reoommeaded in the pest esversl years which would make tsgable the debt instaumants that finea►cs 3tei�e aad local g^overnmetut capital uutlaya, bnt which also would maintain ths rednced mter� costx tu the�e R^overnmenta throngh soms form of subsidy. Geaer�lly, rec�o�mendations have�besn unattractive to State and local governments becanse some authority would review the need. for the project that�ives rise to the debt iasue and the abilit,y of the issuer to meet the obligation, aa►d beoause the propoaals provided for aa�nual appropriatioas from Con�ross to make up the difference be- tweeu tagable and nonta.zable�ield�. Some State snd local�,^overnments have masused their ts�a eaem 'on privilege by en�aq'ing in arbitra�e transaction� in which the from tsa-eaempt issuea are e�nployed to purahase hiqher yielding Fed- eral obligations wh,ose interest is not taaed in their hands. The taa- eaempt ieeue in these cas�g�erallq apecifies th�►t the interest on t�e Feders.l bonds will be nsed to servioe the State and loaal securities.An indivi.dual who purchases a S�ate or local eecurity under such an stbi- trag�e s►rrat►g�ez�nt has t.he advantage of a taa-ezempt aecurity with td�e�.f�tv of a Fe�dera�l �et�u�ri�ty. The Federal Govern�nent bhen Sn�ds itse]f in tdie poai�tion af bevaming an unintendeid e�uroe of revenue$or State �nd l�ca+1 �overnme�te w'hile losing #he opportuni't� to t.az bhe interest income from its own tasable bond issues. The Internal Rsve- nue Servioe has announced that itjwill not rule on the.queetion whether sucli arbitrage obligations�,re entitled to tag esemption under eaisting law. Explana,tion o f 7rro�viston 1.Elect�an to isaue tu.�able bonds and interest a�u,bsidy.—I�ord�r t� enr��ra�e S�ate� and �heir p�ali�i+c�al su�b�divisi�ons vdlvntani�y t�o re- li•nqnish the privrlege of tax e�em�pti�on for theiT debt secur�ties;your oo�m�ni#�ee'ss bill pm�des�h�t the .'"�ecx�ta�ry of the Tr�ASUry is bo p�y a fi�ed percenta�e of the interest yield on each issue of obli�ations for which the issuer elects taatabTe status.Before the first da�of each calen- dar quarter,t,he Secretary or his dele�,m,te,is to determu►e and publish in the Feciernl Re�ister the fixed percentage of intsrest yield which he determinea is necessar;y for this purpose. The fiaed percantage is to appl,y to all issu� of ta,gable obligations made during suoh calendar quarter. . These provisions of the bill are entirely elective; if thcs issuer elects that the issue shalt not be tax exempt,the fised percentaP;e subsidy fo1- lows automatically.There i�tio review of the advisability of the local , project or of the issuer's ability to repay. . � . . . , � � • 174 IInder the bill,the 8aed percen�to be paid by the IInited States may vary�vithia a range that is not ess than 25 percent and not more than 40 percent of the interest yield for c�lendar quart�rs beginning after Deoem�ber 31,1974.Between the date of enactment and January 1, 1975,the fiaed pet�centage may not go below 30 percent of the interest yield. The use of a ra.nge, instead of a constant figed perec3ntage;vPill perrait the Secretary to take into acoount fluctu�tions m the ra,tio of taa-e�tempt yields to taa�eble yields that reflec�the general su�ply of credit in the money market and the demand for credi� Determinstian of the interest yield on any issue of obligations is to be made immedi- � ately after they hsve been issned. A S#,ate or baa,l ovemn.ment i�uing a d�bt oblig�,tion eCt bo the provieions provi�ed by the hill mnv choose to have the fi�sed per- centatg^e the United Sta.tes is to �aq represented bq a separate eet of ooupons attached to the bond wluch shall be obligations o#the IInited 3tstes to the holder. It is thought that the use of such dual coupon obli�ations mig�ht be necessary to avoid violation of the maaimum interest limi�ations imposed on some Sta«tes and localiti�b�local law. Payment of the interest subsidy bq the United States will be made to the issuer, even in the case of dusl caupon obligations, unleas the issuer requests that payment�ue made to a spec�fied paying ag�rent.In no case will the United States be required to a�ume the adminietrstiv�e burden of msking payment direotly to the holders of the obligstions. The IInited States is required to pay its portion of the interest on taaable obligations not later than the time the issuer isrequired topsy interest on the obligations.Where it is the most practicable method of effecting the intent of the bill, adjustment for any premium or any discount at which the obligations are iesued may�e made between the issuer and the IInited States at the time of issuance or such later time or times as may be appropriate. $. drbitrage obtiga,tiona.—For the reasons discussed above, your ' committee's bill repeals the privilege of eaemption frora Fe�era'1 in- came taaation with respect to arbitragre obligations.It is contemplated that the regulstione to be iasued b,q the Secretary of the Treasury ooncerning t}tus eeetion of the bill will provide rules for the tem�orary investment of proceeds fmm a State or lceal government obl�gation pendin their eapenditure for the governmental purpose which gave rise to t�e issue. Ejjectave date.—This provision,as it relsted to the electi�on to issue tasable securities and the interest subsidy, ia to apply to obligat.ions issued in c�lendar quarters beginning after the date of enactment of the bill. As it relates to the repea.l of the tfla eaemption on arbitrage bonday this provision is to apply to obligations iasued sfter July 11, 1969. Re�erd�ue efjFect.—It is estimated that there will be no revenue loas with respect to governments which elect to issue taaable bonds and receive the inter�st subsidy, as the revenue �ained by taaation of the interest on such obli�ations will more than offset the cost of the subsidy. � • ODI N LANGEN 2293 Raveurtrt OFl+7ce BuILO�� 7TM DISTRICT�MINNESOTA TELEPHONE:Ci/�PITOL 4-812I Ex7ENSioN 2165 COMMITTEE: APPROPRIATIONS �0�� O� {,�� /.��y �/,�{,�� HOME:KeMNBOY,Mum. 1 lL v L L SUBCOMMITTEES: AGRICULTURE �ou�e of �.te�re�etttatibeg LEGISLATlVE �as'�jfrigton,�.�. 20515 August 8, 1969 Mr. Harrq E. Marshall Citq Clerk & Conmaissioner of Registration Bureau of Records 386 City Hall St. Paul, Minnesota 55102 Dear Mr. Marshall, Thank you for qour recent letter concerning the tax treatment of state and local securities. I too am quite concerned about the ability of state and local governmental bodiea to pro- cure the funds necessary for noronal operation in this daq of high inflated costs. The Tax Reform Act of 1969, as passed by the House of Representatives, provides for a greater proportion of credit money to be available to state and local governm�nts by increasing the income benefits to the average investor who does not have a high enough taxable income to warrant investment iu tax-exempt state and local securities. Tax loopholes were closed to prevent arbitrage and to prevent individuals from escapin� anq tax liability whatsoever. Thank you for taking the time to send me qour views. I would be happq to hear from you should you have any further vi�ws to share with me. With kindest personal regards. Si� , �' j �� ,,L✓�C�`" ''��,,�._-� LANG ber of C gress�� OL:hp � �� / . • ALBERT H.QUIE COUNTIES: 1ST DI57RICT,MINMESOTA DAKOTA MOWER DODGE OLMSTE� FIL6.MORE RICE , COMMITfEE: FREEBORN STEELE EDUCATION AND LABOR �o�gre�� of t�je �t�ite��tate� 600DHUE WABASHA HOUSTON WINONA �ou�e of �e�regentatibeg ROCHESTER OFFICE: 436 FIRST f`IATIONAL BANK BUILDIN6 307-288-2384 ��jfrtgto�t,�.�. 20515 August 8, ig69 Mr. Harry E. Marshall, City Clerk City of St. Paul Bureau oP Recards 386 City xal.l St. Paul, Minnesota 55102 Dear Mr. Marshall: �►ank you for sending me your views coacerning the proposed change in the tax exempt status of municipal bonds. As you knaw, yesterday the Hou.se of Represeatatives approved the tax refaam bill as reco�nended by the Ways and l�ans Committee. The bill does not remove tax exemption �or state and municipel bonds, but would establish a new program under which conamunities which elect to float taxable bonds would be givea s bonus to mo�e than offset the extra cost of the taxable bonds. According to Treasury estimates, the Federal Government could pay these bonuses and still increase Federal revenues measurably. Siuce the bil.l came before the House under a "closed rule" which permitted no amendments, we had to vote for or against the whale bill. In view of the many needisd reforms and the tax reduction in the bill, it was passed by a vote o� 39�+ to 30. I regret the effect speculation on Congressional actio� in this area has had on the bond market. However, I hope the situation will stabilize narw that the House has acted and there is a better indica- tion what the ground rules will be in the Yuture. With every good wish, I am ,\ Sincerely.yours, ``` ; `�"•.�; �. �. � � � , _ �� .. ��.�� r x. Qu� Member of Congress AHQ�kes .� JOSEP�E KAR'fH eorrmna� ,�Tx p�gy�.�� SCIHNCB AND ASTRONAUTICS mxorrrtra op ?A$2 R1IYBIRN Hq19[OFFICE NASA OYERSIGHT ��, �o�tgreg� af �je �niteb �tate� ��M�� SPACE SCIENCES AND ROBERT E.HESS �ou�e of �e�re�ettta�tfbe� �ucnrions wruaaranve eseur+urt BUa�bittgton.�B.IC. 20515 eo��Rr.e� M6RCNANT MARINB ANO FISHERIES lO�CONYIfR[OY FISHERIES AND WILDLIFE CONSERVATION August �, 1969 f0BOD1N1TMTM"°" OCEANOGRAPHY lWWYYIitLC ON PANAMA CANAL Mr. Harry E. Marshall City Clerk City of Saint Pau1 3�6 City Hall Saint Paul, Minnesota 55102 Dear Harry: Thank you so very much for sending me a copy of the Saint Paul City Council resolution on the tax-exempt status of state and local government bonded debt obligations. You may be sure I will keep it handy for future reference. With best wishes, I am Sincerely yours, Joseph E. K th, Member of Congress JEK�mef JOHN A.BLATNIK COMMITTEES: 8ip DISTRICT,MINNESOTA PUBLIC WORKS GOVERNMENT OPERATIONS , ROOtit 2449 � R�reuww Hause OFmce Bt.cra. �o�gre�� ot �je �r�ite� �tate� �ou�ce of �epregentatibe� �s�jfttgtott,�.�. 20515 August 18, 1969 Mr. Harry E. Marshall City Clerk Bureau of Records 386 City Hall St. Paul, Minnesota 55102 Dear Mr. Marshall: I appreciated your comments on taxation of interest on municipal bonds. I want you to know that I share your feelings and have made my concern known to the Committee and to the House. Nevertheless, the House passed the taxation bill with this provision in it. Generally, the provisions relating to taxation of municipal bond interest provide that state and local governments are to be given an opportunity to issue taxable obligations and, in turn, receive from the Federal Government a payment equal to between thirty and forty per cent of the interest yield of the bond. As I understand this proposal, this resembles susidization of municipal bond interest. I am aware that taxation of municipal bond interest works a disadvantage to the local government in that it removes incentives to investors to use their capital to support municipal projects. The Committee attempted to write as fair a bill as possible. However, I hope with you, that efforts in the Senate to make this bill fairer to local govern- ments will be successful. Thank you for taking the time and trouble to write me on this important issue. Please feel free to write me whenever I may be helpful on legislation of interest to you. With every good wish. Sincerely yours, � ��lr� . J n A. Blatnik, M.C. JAB:mc � . .. DONALD M.FRASER FOREIGNAFFAIRSCOMMITTEE STN DISTRICT.MIMiE80TA 8U6COMM17TEESx $TATE DEPARTMENr OR6ANIZATION 8�2 HOUSE OPFIC6 BUILDIl/3 AND FOREI6N OPERATIONS Z°�"'° �o�gre�� o� t�je �r�ite� �tate� 1 r+reraunowu.O�Nizwr�w�e �v�m Movemerris DALE MACIVER ADMINISTRATIV6 ASSISTANT �ou�e of �.te�regetttatibeg �T�O��'S�RITY POLICY AND SCIENTIFIC DEVELOPMENT8 ��`��n�� 20515 DISTRICT OF COLUMBIA COM M ITTEE August 19, 1969 Mr. Harry E. Marshall City Clerk & Commissioner of Registration 386 City Hall St. Paul, Minnesota 55102 Dear Mr. Marshall: Thanks for sending me your views on the provision in the tax reform bill dealing with the interest from state and municipal bonds. I can appreciate your concern about this issue. I'm enclosing the excerpt on municipal bonds from Rep. Wilbur Mills' statement to the House on the tax reform. I hope that Mr. Mills' comments may answer questions that you have about this legislation. With best wishes. Sincerely, . d M. Fraser Encl. i y�,...,� r- _—_ � _'_ �.i�^:^� �k+'-�±'.-rT�t—��'*�-�T'p,�°''�T° �y�`%'.��L`::,��x y-r--,,,��aa+�e.�.,�..-.r_.�e+�-e.+ �.`�k �4�`�-s'r. .. p ; , k sy ` , °" �"� "� ��.�` � ��` �' � .� .�- � � � rt , ;L. �rc�tq+�R�;�, ,Wi.l.bta� M��.]��'s� s�at2�nent�nn the �ax ��o�sn Ac� o£ �96� , `,�.`x s�� 9�J- , . �,a �=:CC311i�"*R.ESSIO�i`A��t.ECORT.��=;�iOUFS� , �$6981 '' � . . , � y . K • :: 4�, -, � c,; ,,�, � '._, , ; ' . ;, . � , !? a �.` ' a��ues�Gli�h��bse7t��a�bY ttze In-, tl�ctr.inavatmtr Y lricaxne. '�� is ecivaS. 'at the tae�,ble`i�ncoiri�,-�the aIIocation � � ? t,�P(iR� R@V�AL38': aSCTV.ICO; W�Y.1�P3Cr .�� .� C2E0 'k�X C�?Tpt}P�,�3aas ua�'�n di�videad oi dpductions Aro<riaivn,on9y:intezest'c►zz� ^' , " ,,�tatute�`shou2d t�e aPl�liecl to:denp such.�1�,come tlz��rc�;elv�.'T2ie bilt xe�tt�,res tY.o'::�ate a,nci mwii�ipal bon8e is�ueQ,in the , y;�a,� ,�+� �, ,�,corporations ;their surtax exemptiozil,�, faundt�tlons to dfstrlbute �ize�r izxcome Putura is tal.eaY:i�tb� ts,c�ouzit�na.d'even; � + +�„ 'rhe Con�ress did not'izrtend�e:ti��15�k .for,ch�tr7tzL�;Ie puzqwses.It`r��i'�i��s then2 :�hen onl9 g�rtualiy over�'10-9ear ttan� .� , to;l�e=apZ�lied to corporations ��rme�l':1� -t�trava:dsel�-riealil��;intr&ns&�tio�switk►.`:sition-periat. Ii�rC.too�, w0 considereti'a ' ;i ': ,,trie�cours�oY a�exPansinu ot a,bt�Si�ess'.the�r-cant��ibu*ars. . � . '' , C�rnora.te slleea*idns TorrnuItt 8or"2rtu ' ' s i� ,'fn'taa ne�'�geo$raPhia ai�a o�'izito a dif- ~Zzx adritiQn,��git,�es s°suz�nc�G.h.�,L the `'nicipal 6ond inLerest but droPp�d it ixr z �� fe:ent�Yiie �i;oPeration. but xather-3n-;: hu�e r�sr,,urces'cf suc�:falindat�oa�tu� 'the interest oi�ot dis��t,rbin�the inunica ` tendec�_th� establishment ot�a,r,ts tvith- •�ot be usc:d-,�or�:oiitical .purpwes.' �', 1;�'al bond marlcet. � ��`.� 3 ' �n the.�indL[stay practic�s pre9iously d8-' Yn fl�2�i# these provisions, tk�e p�end�ng,>, Z do:want ta calf yoU:r e,ttention `�oiiF ��;�cribed to be sufficientr':-�ithoat: mare, bi�l�ce'.s to iinaSt t��c��feren+ees 8�r in- e�e�r, to a provi�]on in`the bi31 desiSnect � ,to' dettio�str�te thab tlie securir_g of.a ciividuals �ntt corl�rati4ns tca t�e--itttl, "�Q$s� t11e ptro'bleni fac�d kiy States and 1 ' . * �' . � _. '�sues. The. b11 'fo2loa�s a new bc�nd is ; � � a� surtax �ese�npt�ori �d�C �an, accumul�,ted' ^extent poss:t�:e .iv�rt�, reco�rzutiQn to tkae murxiciPalities Lz Poatinb their�p�roack� i ' ,°� �Carnings'cre�it was�ot a major pur�OSe #act tba„ iu s,�naP cvRes thf� tnay �t2„n �vh�ch will procide a,nera rharket for ' � k ��of'the;organizatioii+of stieh a ec�mo�a-% .-I�s�nle �cl'.s'c�.t!csn�� Unf�rSt�iaCe��,i . �". .tlbn. �'he: �I�nljcation oT sect:on 269 lTi , ho�-eyer,ser�P Gf L.`�e pref:ari r.cCa 1ta tits State and municipal bends i�}the ftrtur� ;� �,i " k ,;�imilar :circu:nxstan�ces _was�u�derstaod ta��laa�s P.ng��.r tv he @e°�?l,t xrnt,+c;d�eci :bY enmb:in�t'•sem t,o issue t,�x�:ble i�oi�� 3 ` =and intend�d1to be,sitnilarly,lianit^d for �fn econo�aic`acfiivStkes,`�nd i� r,� ��, but in t-uin 'receiz�2" from �Lhe Federa�� t�e samQ xeason3. �„ ' ' �,cl�imt�t1�Qt tllrir rir�oral_svia�reauat in Gai�erument a st.�hsidy �'�at wiIl com ' � The co+lrts;have �PPlled �9ections�155k -'serzaus c°.i,�oca±icLxs thr t1�e'eccFn�,mY.. � .'.Pensata tlza Stntes ar munlelT�Rliti�;'fo� ' °' ?: �.� ,,�nd ZHJ 1zi a r7ai�ncr cozislsLe�nt��f�ll thlq ' Tlze t�.°-; a-tfnr_*� i�dld In. as n�z�rAk�er.ot 'mnrc�.th�n the extra ]xrterest cost tkx5eiy . ,ri ' F ;intentlon�nf Con�re�s nzxd it��expeetcd, cascrs�iri" zcco�ntriotz c� tYx1��i��;�une�t , incurrcd o:� tax�bio �ecurities; i � � . " � ".,.th�t the Tnterna3 Revenue'f3crviCe w4J1 �3'Pha�u;G iz-�:taQ rC:-��ecPia?t€sx a:ru�a,tmrs�t.� The ~ " pnrtic$?s�tinn �y thQ;�itat�,s .ai�d � reCa`�nize':this li�nit u�en ti�a r>coPe'01 �aver&ri�,.s•xQ�4 0 3'ears irequ.C:r.��y a.��lon�' lcmalitle� �n, tl�ts pro�rc�m �s tfl b6 en .„ � � these�seCtions in its a,udit uctivities�witl} a�57,OF Z�Y�'��' ' �` . ' -� - Gireiy gn e, ��ntuntarg basis.'Ther�`wll� , �• ;respeGt to t�xahie yeflrs'pxior to Js�nu: , `��io:� t�h� Y��'.I daes notj entire�9 be rio compul:;ian of a�ny kind,�o ge� '11 :F � `�`" �&ry 1,.,�3�9, wlien the:phaseaut ai�aanal- `�?��Y�;th"e 8�a:. T.+x`cierencas, c'�en aPter them ta issue tti�able }sonds: MoreoVeF, . _, :, tiple s�a�ttzx exemptions for alt afi�llated "ti� trans:#;ar�^�I nerta9,'in,tt}o��* �r�cs tiY:e FeBera,Y Government wiil�aint.�i�' - ; corpox�tiong zioW Provided bY tt�.is co�tl,= a�hex@ 1��r0�u� AP:�nar tZi�.t t�ere is a a comg2ete hands-oPt policy towar@ such = , , � �niittec,wtil.becoZne fullv::e�ectile . �,.,�� i?��glb±.3t;� ttrat su�.t�,€�cGioti might bond Iwsues and�iil neither review the . �: , Cor'i�qration$,.alsoc ara suT�3�^ted.tp'� ��rQUSe seri�t� dIs!os�'to2� in Ltz(s,evan- a.dvisability o�; the 'local' profect for ' ^" � highex capital gains tax--thv ratr is la1- � om;,'. Tt Qc;':a taa�.� So� �xam�Ze, remove vrlueh tlie func�a are barrowed rnor"the '� ; a° : ,"�reasect=fitsm28�to3d",f�e;cent, ' th� rdvat.`.aryR o�t'tl2e koul�le deCli�iin�t issue'r'e abilit�x t� wervice tlie�curiti�s ;,- Still t�nather area of conce�°n Ls tl�e Caat •1��Ia.nce �LPrecia�oy� Lor`ne�,� kxotwin�, Thq States and 1o�alities si7ould liene� ;' � .��:Gi`eatment ��of�corbtorAte r.ie3•gers: �3ere because �# #;s gxeat nee,r3 for,I�p�aved g�greatly und�r this proeram:They,;vv�i� r�. ; the bilt itenieS an inte,rest dedt�ction fcar o�� ' � � 'he able`ta i.sue taxflt5I8 bqnds at e�rieIa, ' � ` o tivha'�l�:,cali�d debt, �vhere it.has mos ' oz sarnl,a� i'�iso2ss the t�t�,��vg��: 'tive2y low�net cost: �fs s� �e5ult, �l�ey " 'a{ � .oY t�1�e�chasrxGteristics�:t�1 equity se�ttx�- •�a�es a��;xs_a.t�!�vith the rece�at„�„F,�tt�,te `�w911 be nb2e to �e12 the�r,SeGuiities.toY ` � ;ties 3n�triose:cases �vhere it f�-used;te �and mani��:��a�.a u.�`tre fi�sve�,tic� tax-exempt inFtitutions, such as 1�ensfon� �'� :acquir�,-otl�et coxi�orations.�In 't?iis Case r�c�'"u.::y r�u.icc�7y'�'cT'�v"ea'b g��u- "funds an� to indiyldu�Is witbi moderata `:al:so availability of tha�installment meth-+ T!y ov"��z�'�""�5ii��ci pe"'�r ad oi time,Fbr incomes uho are not how attraCted'ta = ''�od for xek�orting �uixts is .dez�3ed t�here .Cx`�'�T�"":�`"Z�i'5��i!'"Era.�v"a�.u�'iiinYam� tax-exerspt Utate tznd 2oca1 gecur,ities be �' � ; 'tli8 deht san-�be.reaciily:traded a :#�h8 .C�x,1n47iz;i;�on:;-ol�e�Lenth cf tT�z�ta�te c�use of th�i^,xelat±velq 9ovv yield. Tk2e , ''market-=-fo��xamPle�.t�'here it.is�T1C$'^ �f�221�1Ylfr.Sn;+.k t3pz�9xitex�esE rp,ceivect by new Proerttrr_ c,i?t, th�zetor�, 1mak� it� •, "; a ( `�;� �'¢sterecl:farm or:there are��tere�t COU- in�ttitluzd� is taLar. intr� coasfa,ieai�tion.,� �ssible for tl�� tates.en� localities t,� j f r�.�idn� aLtached. ` � . "_ ,� ','�`h�s�.itr,r��`s�a�uallY�'ver a�n est�nd- secure hro�id.ne�a m�,xkets,foT tl�eir se� Y , : ;>The •t�a:c �;�lvanta�es navv securecl�b7 .ed perf�� of �'iu±� 4o Liz�ot gz�sv ait�r 14 ,curities and,tt1 More;sho�ild'e�thels ,, j -;�y0nlmr.i�eial banks aa a•�i'esult of-�sPeCia1 �Ye�i's is ti?:e +nt�`ze�st.�on issueN of t#�x--. borrpwing pxora� tns, : ` . ' ; � .reseY°vos for-bad debt losses and.cc�pita�.. e;�empt bandr ��en intr�scet�tr:�t tn the �� Ta� Feform,�c* t1at.o?��Y pro• � � g�ins treatinent for ISondr>-held in �thetr �e c;tc:zt�other t�x preference�, vfdcs remecii�1'meast{*eq tp limit t�t' ,-, : � " , bankfn� -business. are wi�lidrawn,``JC�,e. ....-Even tv2len �h.s tim� 9s re�ehr..d,`tax- preYerences, ;.ft: nlso Fn�lces structuxal , ,. , ; ba.nk� ar�'Plac�.on;:the re,ular ��eaY;'��orri'pt m?;nici�al tynnd,irta�•eb� will re-� �chnnges v��hf�h,"t,��ether,';"wfii prov�de,,. ,�_ ;;.., I ,. rilovin�.avernge in computill� their bad. Eult'u� ki:c 3rr�o:,ition oi a f,��c'b��rden: reliei• to tlie.bulk oP`o� t�,X1aaY�rs.''In ;i ;debt�r^;serves but.axe giv� a•1D-year anl�in��ose rasea�c�here a,t�,�c�e��er has fact, the remi�diE l measure.s go hand;uri, � S .carrYbe.cg iP they.ineur loss�s k�e�cess of �cre�,refr,re:�..v inc�me t3ian iao l:ys taa-, hand:with the reliei proVlsions sinoe �.,. . t; ' their income. ' s " ��` "t '� able i.tzco*�ie As�'a. rns�xlt,'ev�n after a the revenue �a.ir.s resuIting fxdzla the � `� i �loan essociations also,v�111 tae're9.uired . ��ex �� t'�xiY +�t preseat, 5ct'4ong cts' ,Po.sible fo: .t�� are wh�t make it , Mutu�,l savings banks ariQ saving9��nd l0yye�. _z*e val, indi�i�u:�ls �s%ill p�y no remeaial me ti =� �s t9��orc� the-xta8 xelie�a �� ,,�o re�uce their overlq`generbus �ieduc-. -the�r gref°re:�ce fnaoir�e dcres�sC,� excecd Wh�n,the b!11 �.s fully ePPeCtive, a22 Lh� . � ' tion4 for'excessive bari dslat !^ese�rves. t�eiz �a�:��le fxY�o�e. " � . � revenue Lzains,recureci by,Ghe Coz°rectiv� . ,�These,institutiona will no 3onger be sl-;` 'At on�,tir�e �e �n5ltiered iu�asfng ��?�'es ure i3evoted to rellef ineasures , � �='lowed_to compute thPir bucl deb�'t��due- -s:',10-b�er�ner,t m3uixnum ts��: en cot�gai�aGe, C)�e of t}t4 relief-'provisi�ns �rovid�s ..� , 4�tions on the basis oE R reserve amoul�tizl�, holdin�s oi �'uL�! enc� tatini�,�?al bond tor increases in tt�e standa�rd deductiqn ,` :'+�0 3,percent:of-quaYifyin� reril property, "l��terest '�n?t k.��i3,'Fr us d�.'oI>7ied U�cuuse 'The i�resent s�andard dedtictiun amounts �,:Ioana. .In,addition, the Rlternative�de• We,4id n�f; r-aTit to serlUUSiy alTect tfie ,to 1Q �erCent nP �dSueted gross �ncome' ' �,k ductibn'al2owed Yor their,bad delv� r+e- mucur,i,i�t�oz�d•taar�et. � ' : �: � 'w1tYi,a ceil±n� af�,$I,OCO."'I'he Tax.,R� � serv�s '8,lso'!s'ta ba red.uceci;�i'adualig `Thg c,t�ly�otla^r�rovi�ion�rhich,�ight form Act inc*.ea�es tlie standard de�uc �,� '.�"q�er a�Period o� .]O years irom '6p �ve s�a�e iaad'xreet e�c�t on;StaLte eaa$ t•ton to 13 percent with a $1,400 ceil,ing � :.t�.30.;percent of taxab�e 3ricome. II¢re. 'mun;cinul t�nd intaxe.t ig t�1ze so-called, � 1970, 14 percent�+rith a'$1,700 ceilinS : : " � ,too, ho�vever; in order �to�provide pro- ;"�,1�acs:4icros foraaula far cleduc�+oi2�. Un- �� 1971, and 15 perce�t ,witli a..�2,000 - ' . ftection:.ln the event of unusually�lar8e� 'der. thl� !'n�Er.u1�, deciuctions for such 'ceitin�in1972. ... . . . _ :. e rs� '� ot suchhinst�tu±oex�s is incre�ed tvai0 -taxes�a��zt�t�e tlf��iiiccaa eeA¢�t ee i tion is needed to cOL1IlY,(:TACt the,;lmPa'G , ' '�Years:Th i�,ta geLher with tk}p presealt:BM --�;�X�;y; �;,r�r>ie anci t�.x r��.re.nce tzx- oE n9.gher m^c�ical ec�&ts, hir�h�r int,�rest W ',Year ca�rry-forward prov��'1Riz=e�llo�vs ths ��cyme an�Ys�s bas�s of the prcrpi�rtion of;ra�tes, hi�h B�ato and lacal ta�ces.°.s�nd` ' ,�preac�iX}B p�1,14Sse�oYeE'.#.�i YeBrs. �,-�; �each tr� tY�e,'�ota'.. `Tisis+s b�s:z�use l,ha increased' hazrieownershin i�.encoutag ' . : ,:� '#�et me tuzn nova to the&ra�.af prlvate ,itemiita�'deducdi;>ixa �.:e,��!��,,�• �D r�px�- inq more and more t�aer�a�exs Co;it�nize � � ; ��fo'ttnttagiong, The bill "iec�t�frc� thesC 's,tQnt an-�n,.liatS �#�, or cantz�butect, .�s th�ir deductiors. Nearly 84 mfil3on x8" ;.f,PUndat-lons to P�Y a 7� percent taa an �muLh us.� :+� �he t�x-fxee,inc,cn�e as ou� turus or mox� thasi nal�.0�-�.11. tiaxab�': - .�-, � � � � :" �, ,r,_ � ,�: � '�,,: •+ �� , , , , , , • , , ., '� F _ � �� G1,� �{T,� �t +' � ; .�i�V� ; N��a��` . _ "7 rr : w�: . � ^.� .. ; . . :. , . ' .�� •.. 4ryf � T . , . �� .� . . ;'w ?� y :. �: ) : k 1. . b Y ;.. � . . � .. �� . � �' � n,o- y�m5 t Y" yA��+t y��'�x:� �y. � A ��' �l ,� � . ,y ��a4W�,�.*��L> "��?�Iw'&Yt�r�[�r�,S.�`'�'i��'��'+E YtJ",�, ly�&fe� ��1`�°ttea6n. t�� siy��^s�JVa�+:'x,az,&�"3:h_ uk M1.i'�':�m, w..�A�.tn"�r - -- - -.�.._ l�cWr�c .et. •J • i' ___ 's. .. � � HARR190N A.WIWAME,JR.,NJ.,CNAIRMAN OEORGE A.SMATMERIl�FLA. EVERETT MC KINLEY DIRKSRI.ILL. • WAYNE MOR8E,ORE6. FRANK GIRLSON.KANB. ALAN9IBLE,NEV. WIN8TON L.PROU7Y,VT. FRANK CXUf1CN.IDAXO HIRAM L.FON6.MAWAiI JHNNIN63 RANDOLPH„W.VA. JACK MILLER�IOWA �I ♦( ` / EDMUND B.MUBKIE,MAINE THRUSTON B.MORTON�KY. {��Ntev ��Tf1�' f�M'/Y'�A EDWARD V.LANG�MO. CLIFFORD P.HANSEN�WYO. �� y� �� a'" �'S�'�'~ �� PRANK E.M088,IJTAN EDWARD M.KENNEDY�rawss. SPECIAL COMMITTEE ON AGING RALPN YARHOROUGH.TIX. �NRSUANT TO 8.RES.Z0�9DTFi CCN6RE88� STEPMEN M.YOUN6,ONIO WALTER F.MONDALE,MINN. WILLIAM E.ORIOI.�STAFF DIRECTOR JOHN OW MILLER�MINORITY STAFF DIRECTOR August 26, 1969 Mr. Harry E. Marshall City Clerk City of Saint Paul 386 City Hall St. Paul, Minnesota 55102 Dear Mr. Marshall: Thank you for your letter urging continuation of tax exemptions for municipal bonds. The FIouse Ways and 2�eans Committee tentatively decided to retain the present tax-exempt privilege for State and local bond interest but to provide an alternative treatment. The alternative would allow the State or local government to fore�o Federal tax exemption and choose instead to accept annual Federal payments on the bond issue equal to the average amount. The Federal Government would not restrict or regulate the purposes or amounts of the bonds other than to make the alternative treatment unavailable for industrial revenue bonds and arbitrage b onds. The local unit would continue to market its own bonds. An interest subsidy can be provided by a permanent appropriation in the same manner as interest on the Federal debt. States choosing the alternative could issue two coupons on their bonds: one payable by the State or local government and one payable by the Federal Government. Of course a tentative proposal by the House Ways and Means Committee has a long way to go to final enact- ment. I intend to watch any chan�es in the tax exempt status of State and local bonds very closely because I believe that we must do nothing which will make it more difficult for hard-pressed State and local governments to acquire needed capital. With best wishes, Sincerely, �i��+Vf rc,� ��a��C` Walter F. Mondale � CLARK Iv1ACGREGOR COMMITTEE ON THE JUDICIARY THIRD DISTRICT,MINNESOTA DISTRICT OFFICE: WA9HINGTON OFFICE: 120 U.S.CourereioUSE AO9 CANNON OFFICE BUILDIN(i � MINNEAPOLIS.MINNESOTA PHONE:Z2.�'L$7I �Cor�cgre�� of t�je �r�cteb �tate� NEW PHONE:725-2175 AreEw Coos 202 A�Cooe 612 ADMINISTRATIVE ASSISTANT �ouge of �.tepregentatibe� DISTRICT REPRESENTATIV6: DAVID N.KROGSENCi "�y�y�iyy�/,w�y' �.(�• z0515 MISS MARYELLEN SMITH iffl�aiA N iY�4 W August 14, 1969 Mr. Harry E. Marshall Citq Clerk and Com�nissioner of Registration City of St. Paul 386 city xaii St. Paul, Minnesota 55102 Dear Mr. Marshall: Thank qou for your recent letter regarding taxation of interest on municipal bonds. On August 7th, the House of Representatives passed the Tax Reform Act of 1969. The bill contained 27 ma�or and manq minor changes in the Internal Revenue Code and was considered under a "closed rule", which did not permit the offering of a� amendments. We had to vote to accept or reject the legislation "as a package." You will note, from the enclosed statement, that the House-passed bill retains the full tax exemption on interest from state and municipal bonds (except for some of the very wealthy indi- vidual purchasers), but provides for the local option of a federal sub- sidy to encourage state and lacal governments to issue taxable bonds. For several weeks I worked both publicly and in private sessions with the Members of Congress serning on the Waqs and Means Coumnittee to insure that the Co�aittee's bill did not impose a tax of anq kind on the interest of these boads. The Tax Reform Act of 1969 is naw pending before the Senate Finance Com�nittee. I am urging the �mbers of that Committee to continue the tax exempt status of state and local bonds as in the current law. Sincerelq, � �� CM:cc3 Congressman Clark MacGregor Enclosure . Au�uat 6, 1969 ,.-----,,� Hon. Wilbur Mills Chairman, House Ways and Means Committee j House OPPice Bu3lding Washington, D. C. � Deax Sir: The St. Paul City Coun dire d m� to nd you the eneZosed copy of their resolut;bn, unci � 2�+5160, adopted August 6, 1969, urging th 1 be ne ta protect and preserve the tax-exempt status af st a local ��vernment bonded debt abli- �ations, all as �ore y set o t in the enclosed resalutio�n. � 'Very truZy yaurs, \_------ ___ i�� City Clerk Also sent t� Representative Wilbur Mills Senator Eugene J. McCarthy Senator Walter Mondale Representative Joseph E. Karth Representative Donald M. Fraser Representative John M. Blatnik Representative Odin Langen Representative John M. Zwach Representative Clark MacGre�or Representative Albert H. Quie Representative Ancher Nelsen F'xT�li��urlio��af��rz�i�rs�•tn 1. F'IcrtiiJra to ik�YfG(- f�r:►�ntrlr�i�wu�and��it.ere�t x�ubsicly.—T i� orcier to e+�►r�ourt��e 4t;�t.c:s ��xi t;heir �x�lit-icnl ,-u�rdivi4-ians �r�Iunta�fiity t� r�r- l�nqui�li tlie nrivii<<�,re<,f t.na exem�pdi�r�t fc>r tl�eir de�t securi�t.ic�;, ��trur ��n�ni�ttc�e's bill F�rovides tha�#.the fierre't,:ti�• ��€the Tt�e4e.aur,y i�to�my x#ized �ercent.n.�,re c�f t.he int.Prest,yietd on e:►c�}t i�sue af c�hli�►ati��ns f�r ; �ebich the issuerele�tstaxwt►l��sEntuc.t3efoir,t.l�e first d�y of c�acl�c.�l�+n- dar qiy:trter� tl�e :+erretnry or hi�detP�!r�te, IS tA (IPtAi�minc� nrrd rnit�lish ii� tl�a• i'ader.►l Re�i�t��r thc� tixed �x�r�•ent;►�;r uf inten�.st yie1�1 ��•1►ich l�r Municipal Bonds. Th�� pre�ent exemption on in- �oterrttiii►ew is iiecr�:;�ary fur thi5 purrx�u�. '1'!ie fited ��e��•enta�►e is t.� tere�t 'trc+m <tate ynd municipal bond� waw recained, appl,y t� �til iSStIP5 nf ttLCRBIC (1I)�l},K�tlOR� m:1�P �l1ICIn�� ,u�.h r:��c•fi�<ir but the federul Kuvernment wacld �ffer a suh�idy 1�� uttcte-r. encoura�;e I��ca1 Kcn�Nrnment� to i�tiue taxeble bc►nd,. The Thece pm�-i�;ic»►s of t,he l,ill ;ire entir•ei�• elc•r..ti��e; if tl�r i�,yucr c+iax•t.�; sub�;id� woufd �x E'(�UHI to the avera�;e cost uf the addi• rhxt.the issu��Irali not hE!t�s Pxen> >t tli� tix�•ci ��rc�enrno►r�sulr�i�1 `f��i- tiuiial intere�t px��ahle (ov�,r the intere�t on tax-exempt lotrs sutomntic�lly. T}ter� i; tro rni ier+• of t}us .tclvisn.bility of tl�e?]nc,�l t,��nd,i pt�,�::ome add�tion�I smo��ni. pmjectorafthc�issuer'ynhiiit.y t�repay. The arr�uunt �sf thE• �,ub.idy wa� cu be determined bv the T'rra�ur}• `+ecre:ury a�ithiu a ranQe of '?S percent Under tirc bil1,ttle fiae.� per�rnt,n�„*c Un be �tiid bq thu United Strites } tu 4t► �rcent uC thc intrre�t yield ut itie b+md. Fiowever, may vary within n rs�n�e t.}►,�t� i�nc,t le,s t�hfln :�perc�,nt snd not�ora � f��r the• ►ir.r tive y�ear• che �ub.idie: are �ranted, the than 40 percer�t ��f t.l�r. intc�cr,�t: yie.lc� fnr c�azlenc�ar c�unrt�ts t►�innin,� I : ran�;e wa�to he:�i1 percent to 4t1 perct-��t. aftc+r Der�ntF�er�31,l�►7�.Iiat��'PL'il f�ll`ii:�t+�Erf Clifi(St,I7l�11G ttTl(�.lat2qaj'q 1� Individual. recei��inK tnx-exempt bi�nd interest over 1A75,the fixrrl }x�r�:<�iit.l��(! Pil:t�• n�rt r�� l��lu�c :�0 pement crf the inter�st :F5,u0�► µ•o�Eld hae•e to altoc•ate their itemized deduction:, yield• Tho usr, nf a r.►n�;e, iTi;te:1cT ��t ,Y ��>n,tant fi:eeci percentt�qe, will : such as char�table c��ntributiuns nnd medical expense�, p��it the �•7�eCetary tt� tnke it►t<> fl��<�t,unt flti�ett�atioris �n the rntro of � ! hctw•ren their taxable in��me anci their taz-free bond tax-exempt yield3 ko t;ix�il�li� ��ii�ld�+ i;tft.f Teflect the �BneCt11 supply of ' interrrt. Thi� fl1le would apph' crol�• to new i�t�ues of eredit in the mone.r rr��rk��t:��ul lhe dt•t��a�ne1 for cre.ciit. Determinstion ; bond. and wo�1d he imj��d under a l0-year tran,ition of t.he inter�st��ield uti ;ttrv i�si��,f r,l�ii�►:titions is to he mnde imzr�ecii- i i arran�ement. ��y RftHi't}lhy�t�ivt�}J��en is�i��.�I. : � Benk� and vther fintincial institutions having CIC- A .S�.StA (1p IY�L) �„rn�'t�t't►►n��nt. r-::t�in�„► 1 dc+k►t• c�►li�,,�wtiotl st��jQlrt M t pnsit� or p��licy-h�ilder acc��unt• wouid be reyuired to the prnvisic►Yis pro�•ide�cl bt� tlu� I�ii1 t�►;��• chonse to hn�e the f'ixed:per- j allcxate intete�t-expen:r dc•ducti�n:: hctween tnYable in- centa�o the ZTnite,d �+tnte5 i�; ta p:i.}� t�e�>rP+��t�t��d by rti separnte �t of come and tax-exempt b��n�i interert. ThiP requirement, c�upons atta�hed t��thes ix�iul ��•hich �h�ll lx�c,t,linutions of the t]nited ! t�K>, would appiy only on nrw is,ue� hnd wuuld include a St.�tt�s to t}ie }iolder. l't i5 t}��i��►ht, tli:it tl►f� use. of sueh duf►1 eouTcm tt1-year transition rule. obligations n�i�ht F�e nt+cec�;,trti� t« a��oi�l �•i��L•ttion of the �nu.xtmum Etevenue ic�,�: '.Vo lo�ti i: e•xpected becau�r revenue internst 1imi�t.tttions itnixi�ci�r� !:c►ttir �,tateti aiul locaiiGies b,y l�ea1 la�r. i from t.axed bonda i� expected tcf more than offz�et federal puynlent of the interrst �iil,�ici�� • thi� I'�tited State5 v�ill I� �sde I sub�idie�given to Ic�cal government.. , to the isstrer, ��-et► in th�� r:t��. oF�cii�:el �•�iuCK�n obli�ations, unle.+S.S;the ��, issuer reqvesGg that J�uy�ni�rit}w it�:�cl��tc►r� ��c,�.ifierl pay�n�a�nt.T�no ; ease wil! t�he I7nited StattP� !K� rrt�u:rrci tc� ;i�s�ime the zdminzstrtettve � burd�n of makin� 1�a}��nr�i�t �lire�•tlti• t�� t!►e. hniciers af t.he ohlimztions. � The.United St�itc�� ic re��uir�•�l t�� p.�v it� norGion nf the intetr.� on j t�txttblo abli�tion�n�,t. iaY�•r tl�un the t imt:thn i�;s�jer is re uirc�c�ti�:��ay int�+rest on Lhc ubli�:�tia►n�. 1Vi�t�tr. it. i,flzc �r�ost prnc�tirnb��+ n�r�tluxl of � eRectin� the intent c►t° the t>ill, ;idjtistm�nt for any �rc�miurn c►r.=a.tty , discount at. w�hicl�the ()E}II�,*7►ti�>n:;are iy��ied may kx�rnade tx�t��•een the j i�s�icr and t}�f�tl�nitecl :�t�it�ti.�t the ti�ri��►£is:+»�nr,�or such inter time ar tirnes A.s muy t�e!►�yfir��(�risike. ` � $. Arbitra,ryr ob1-ir��rtim�.�,--F'm• th�� re„a„u�ns cii�ci�s.�d xl�t•e, y'our i a>rnrnittee'S t,iil rt•Z�+�t�l� thE• pri��ilc�.�e uf e.xernptic,n froni �'w��r.sy itt- cc►n►E+taix�,tion «ith r��.�K��:�t t��;irl�iri,��,n�.��tfii�,n�ri�,n�. If.is��onternPlste�d ; : AUGUS7, 19�9 tli:tt the r�'r!IIZRCI(3215 ru f� i��cuxi 1�:� tl�e 4�•� ret.iry �,f th� Trea$ury ��m�•��rnic��;s.liis��t,iun nf it�e�l,ill �cill ��r�}�i�e n�1es�<►r the t�am�arary � i�irr�in�ef�i uf ��r��•��ci� fr��ni <i �t;�t+� ��r 1<x�,►1 �,►ov�rntnrrtt. ryt�it�ation Pencli�►;; tl►��ir eY�x�nE3it.iir�� f��r tlu+ �;rr��i�rnrc�rnta�l I>ui•�xr;e �l�ich gave r��t�►t,h�,is�rie. F'fjec�ti��e d«te:—'1'ttis i,t�o�i-i��u. :�, it ��latc��.t tu th�� le<'t1ult ttl �,,'�iE1C t.uxa�le �c•us•itic� atyd t.lir ititc�r�,�T �tt��.yic��', i�; t�� ip�,l�� t�� l�li�,�at,ions ; i,�yuec� iu cala:ndar i��i:�.ri.+r� Itt'rflittitl!„+ uft��r f.�►e ct�ite ��f c�nx��tmerit. af I tlte bill. A4 it rc�1.►tr:. i<� tEu- rf��,e.�l uf tl:� t<is c'Xet11Ei1ttltt QIl :irE►it�a�►e lwnds, this E�t•o��isicrti i, ta� ;s}��t�l� tu <rl�l��;z.ti+�us i�.�ue�:1 t�fter .J�EIy 11, 1 sss. h'rr�c�i+u� ,�e�c•t.- I� �- �•�tis��:t,s��l ii�ut �1��rt• ��•ill bc ��i� ret�i�nue•,ln�.; tt'l�.�l CPtif�;CI f{� �,r11�t'Yilil�l�li1� u'��N'�i [�}i��t tc� I��+IIt• LIIX:i��jt! f3(/11(��i±ttll(1 rt�cei�-e t.}ic inl��r��;t 4ul�,irtt', ,�; tl�i•. rc��•nin� ��.iin�•�I l��, t:rsutiot� Of tllN i►ttt�tr�:t�ti�iEE�li��hti�;�t iuii,�� ii1 tt�ur��t f,:uj��tt:w•t:•tit<�c��t�,f tE�esuhgid��. . • . � � � `� -� .. 1 . �. . . ��'� M �7 M �� ,o� ,� �� / � A �, , ' ' � `' .� " . � By David Reed " � � � The financial wces oi Cook County govern- �� ment deepened again Monday with -a The county a ve , , The IIlinois Generai: Assembly tt�sds year � distxibution revelatian by Budget Director C. . in'bonds a month ag�o to obtain funds for suthorized the County Board to make the � ' Richard Hodgman. emQloye salary uacrgases. . �12,000,000 bond sale to help balance:the ca+n-, ° � , ty'a 19�buctget. ` x � • It was,.it appeaced, a partfal brea�kthrough , . � �� - ��n � �n an�� l�e� B�ut dtl�•e bidsrtfait dit� materializep� �_ , rea�n, Hodgman satd, is th�t. tb�e Legislature ha$ limited the county to se� : • . bonds c Itt a ma�imum laterest rate a�� A� �� ' Per cent � tan a r ratetrac. � . � By �erry De Mut�1 " some 450 acres comprising the track, its fa• �`T}� gofng,mazke�rate for interest is 8�� E cilities and the ne�, 450-room Arlington Pa,rk �r cent,'� H " � Ofticials from Arlington Park racetrack and Towers Hotel. Egcluded are a 13-acre parcel ��added. In othe�r w�ds� _ the Vfllage of Arlington Heights have reached northwest of Rohlwin 'Rd. and a 20-acre lot wh�eaxa 6 per cent when you can t 8 ? , '� tentative a m lans Yor the v111a e $ p Hodgmau is counting on the ga�odwiil o! , � �-�P 8 on the southwest comer of Euclld and Wilkte Ctucago fiaancial insl#utions. to anues the race�rack. - road,s. �°We will robab M anaexe.tion.petition has 'been presented p �°Sa ts;�c�sce campaL� . to the village board which will set a date for a W�sh said the aanega.tion gropasal was nies and `klnd' fmancial iastitution� and seek public l�aring on the �ssue, sai�i the village� reached after negotiations between village of- tiieir advice and counsei—and f�eir money�" -t mMa�er, I;eonard Aanson, on Monday. .After '�icials and officials irom CW¢ago Thorough- Hodgman$aid. , . qte hearing�the board will vote on the anmeg- bred Enterprises and Gulf aad Western Land_ Uridaunted by the latest Hnanctal ct�isis $��p�� aad bevelopment Corp., which owns CTE. news, the C,oun.ty Board Monday unaqimouslq Walsh pointed out other advaata es and In its petition� Chicago. Thorougl�bred En- . �nefits for the.communi He said CTE approved plans.!br a new f29;000,000 Arthur J. • terprlse� which ope�ates the track, demands ty' Audy xome for Delir►quent Children. that the viliage approve night racing at the Plans to build a shopping benter, convention ��i,519-bed,facility will be located ad- track. In January, 1968, when Arlingtrm Park �,�g�rise apartmenta and office�uildings j�ceat to the present �b� Aud� Home. on the site. - 1�Bq1188E6d thAt.tlle.I11I�101s R8C�1$ BOSTd &p- COTi�t.,�''IOyd T. Fu118r�vhll@ VOrit�$ fOT thE pmve night racing at t1�e gark, the village Unde'r terms ot the Proposecl annex�tlon, pla�, criticl�.�#e bqard #or actiag tyoo so�a board voted unanimouslY�oPAose the. awve Arlington Heighta wouid auPP1Y f�� P�� after a public hearing on the matter: in response ta citi�v► pmtests. The racing water and sewage�rvice to the arAa which. At the 1�aring last Wednesday, rg�Sregeuw � �ward th�deferred actioa aad the pa�rk wlth- ' at preseut,is w�lncarporabed. atives of saa civic gmups crtticised the p1a�eA ��re9�� Eve�f if the annemmtlon were approved as facility as too large. John Walsh,president of Ariington Heights proposed, final approval for night racing stiil Bulle said approving the plan 'wtt�lbul Village,said Monday t}iat"the viltage will not rests with the Illinois Racing Board. weighing the'crIticism furlher iadieated t� ' oppose Institutlon ut nlght racing.�� Lights for aight racing wer�installed at,� h�ring was held "�nerely to fu�fill:t�e let#� Tncluded. in the annex�tion prbpq�,�re 'tra¢k ea�rllec t�ie,yea�r: -�`.�,� °-ef�F"i�a�#��ir°�1�tpose:�� <. .t-