On Monday, the U.S. Conference of Mayors made their recent study public. The analysis enumerated hindramces to economic growth and boosted unemployment as a result. Also, putting a limit to tax exemption would lead to more expensive borrowing. The stated cap was for the interest paid through the US municipal bonds.
President Barack Obama's financial plan last April recommended controlling the rate at which top earners lessen their tax liability at 28%, resulting to raised revenue for the country.
Municipal bonds were often sold to rich investors who are willing to take lower interest due to tax exemption. If the President's budget gained the support that it required, the limit would essentially decrease the interest on municipal bonds.
The Mayors throughout the country estimated US$173 billion greater interest expenses in a decade if the limit was pushed through.
"State and local governments who have been a major drag are now coming to a position where they no longer have to lay off large numbers of workers," Ben Bernanke , Federal Reserve Chairman, said last week. This was when Bernanke deliberated on the parts of the economy that "look a little better". He added that the move could direct the central bank to retract its monetary stimulus.
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