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Md. Democrat challenges Obama budget, saying it will decrease local revenue

A Maryland Democrat objects to an aspect of President Barack Obama’s budget – and it has nothing to do with Social Security or Medicare.

A proposal in Obama’s Fiscal Year 2014 budget to reduce tax breaks, primarily benefiting the wealthy, is drawing fresh criticism from one Democratic congressman.

Earlier this month, Obama advocated ratcheting back the exemption that top-earning investors can claim on interest from municipal bonds. Under his plan -- as well as the Senate’s budget resolution -- the cap would go from 35 to 28 percent.

Such changes, according to a new nonpartisan analysis by the Tax Policy Center, mean that people earning $200,000 or more a year would pay 86 percent of the new tax revenue the budget calls for in 2015.

This is the kind of thing that usually sits well with Democratic lawmakers. But Rep. Dutch Ruppersberger, D-Md., says the limits would not just affect the wealthy. He called them a threat to local-level infrastructure projects in a recent Baltimore Sun op-ed.

“Why is this important for our state?” he wrote. “For more than 100 years, these bonds have been the single most important tool in the country for financing new roads, schools, hospitals and more.”

The lawmaker added that his opposition is rooted in his years of government experience at the county level, which many members of Congress do not have. Fidelity.com explains that states and localities issue these municipal bonds, and that they are often an attractive option for wealthy investors, because they can exempt interest. The 28-percent cap, however, could drive down their appeal, drive down investment, decrease revenue to local governments, and, in turn, increase their borrowing costs.

In fact, according to a National Association of Counties policy brief, the sale of municipal bonds finances 75 percent of all national infrastructure projects. Ruppersberger said Maryland recently paid for an expansion of the Port of Baltimore and the addition of express toll lanes on a major highway with the bonds, projects that together created about 6,000 jobs. 

Other Democratic lawmakers are pressuring Republicans to start the process of resolving the differences between the Senate and House budgets this week, NBC’s Michael O’Brien reported.

Ruppersberger, according to his office, is starting to write letters to the president and congressional leadership in an effort to protect the tax exemption. Fourteen senators signed onto a similar letter to Obama earlier this month.

Still Ruppersberger acknowledged his battle is likely an “uphill climb.”

Editor's note: This article was changed to emphasize that Ruppersberger objects to the part of the president's budget dealing with municipal bonds -- not the entire budget.