Nebraska Rep. urging colleagues to support tax-exempt municipal bonds

Bloomberg News

Nebraska Rep. Don Bacon is set to release a so-called Dear Colleague letter urging his fellow lawmakers to publicly call for the preservation of tax-exempt municipal bonds.

The Republican's letter comes as public finance advocates worry the GOP will target the tax exemption as a revenue raiser to cover the cost of their ambitious tax package.

"The tax-exempt bond has helped drive the local economy, spurred job growth, funded critical infrastructure projects and enhanced the quality of life of our constituents," reads a draft of the letter obtained by The Bond Buyer.

"We urge your support in preserving the federal tax-exemption for municipal bonds, a critical tool that enables state and local governments to fund essential infrastructure projects efficiently and affordably."

Dear Colleague letters are official correspondence from House members, committees, and officers used to encourage others to cosponsor, support, or oppose legislation. 

The deadline for signatures for Bacon's letter is Thursday and the document is expected to be released early next week, said Dante Moreno, a lobbyist for the National League of Cities who focuses on tax policy. The NLC issued an alert urging its members to ask their Republican representatives to sign the letter.

"Preserving tax-exempt municipal bonds is our number one priority as an organization," Moreno said. Losing the tool would "blow up city economies around the country, especially for small and rural cities, towns and villages."

The NLC had "identified [Bacon] as a champion for local governments and local control," and approached him about the letter, Moreno said.

A five-term representative first elected in 2016, Bacon represents Nebraska's Second Congressional District, a purple district that includes Omaha and surrounding suburbs. He sits on the House Armed Services Committee and the House Agricultural Committee.

Last year he ranked first for bills signed into law in the 118th Congress, according to the National Republican Congressional Committee. His top donors in 2023- 2024 were the American Israel Public Affairs Committee; No Labels Problem Solvers, which works for bipartisan legislation and has supported third-party presidential campaigns; and the National Association of Realtors, according to Open Secrets. The securities and investments industry is among the top five industries that donated last year.

Bacon is not a member of the House Municipal Finance Caucus, although the membership of that group appears not have been recently updated. He was not immediately available to comment on the letter.

"He has such a good understanding of his community that he was a really good person to do this in D.C., and it's a nonpartisan issue," Moreno said.

During the NLC's February advocacy day on Capitol Hill — where the group brought 1,300 members to lobby for their priorities — the local Nebraska delegation was eager to get involved and pressed the issue with Bacon.

The NCL has seen some "great feedback" from some House members about the importance of bonds, especially those with backgrounds in local or state office, Moreno said. The letter "is a good opportunity for them to show that support," she said. "You don't need that many members to say that tax-exempt bonds are so important to me I will sign it."