There is no need to freak out over news that Congress may change the tax treatment of airport terminal borrowing.
There is a need to pay attention.
Last week, the House passed a bill eliminating the tax exemption on interest from so-called private activity bonds, or PABs.
Under current law, PAB buyers don’t pay taxes on the interest they earn. As a result, the bonds have lower interest rates, which is good news for those issuing the bonds.
Tax-exempt municipal bonds have been available for decades. That’s how cities and states borrow for streets, sidewalks, and public buildings.
Since 1968, though, federal law has also allowed the issuance of tax-free bonds for more semi-private purposes, like airports. Hospitals, museums, and affordable housing projects are also on the list.
Some Republicans say PABs are essentially a public subsidy for private businesses, and they repealed the PAB exemption in their tax reform bill.
Which got everyone’s attention around here. Kansas Citians recently voted to borrow $1 billion or so for a new terminal at Kansas City International Airport, and PABs are likely…