This week, the Wall Street Journal’s John D. McKinnon and Andrew Ackerman are reporting that House Speaker John Boehner “is willing to consider curbing the tax-exempt status of municipal-bond interest, subject to negotiations with the White House.”
Reality check…the only reason investors buy muni bonds is because of the tax exempt status. They pay less interest than other bonds that are already taxed so if they are gonna tax the muni’s….might as well get the higher interest rate. So what happens then? Local, county and state municipalities will have to get those loans (you know…for bridges and schools and so forth) at a much higher interest rate. Many will not be able to get them at all and be forced to cut services.
Meanwhile it looks like the can is going to be kicked down the road….again:
House Speaker John Boehner privately told President Barack Obama that he’s prepared to consider more than the $800 billion the GOP has already proposed in new tax revenues — but only if the White House will back much deeper cuts to entitlement programs, according to several sources familiar with the talks…
With this stalemate, Republicans are starting to ponder a Plan B: Extend the Bush-era rates for families who earn less than $250,000 and then reopen the debate on taxes and entitlements next year, when the nation heads for the debt limit again.
Allah thinks Plan B might give Republicans more leverage:
So Plan B it is, which would be a dismal end to a dismal year but at least would eliminate the leverage Obama currently holds by virtue of the automatic January 1 tax hikes. Pass Plan B and get taxes off the table and then you can steer the debate entirely over to entitlements ahead of the next debt-ceiling hike next year, when the GOP will — theoretically — have more leverage.
I say “theoretically” because their leverage depends not only on being willing to hit the debt ceiling this time if Obama balks at deep entitlement cuts but being willing to identify specific cuts which the Democrats will then spend weeks demagoging as part of another bout of Mediscare. Think Republicans have it in them?