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Building A Better America: Tax Expenditure Reform And The Case Of State And Local Government Bonds And Build America Bonds, Blaine G. Saito

Blaine G. Saito

Currently most subnational government borrowing in the United States is done via tax-exempt muni bonds. But they are riddled with problems. They are inefficient at delivering the subsidy, and they create economic distortions of investment choices. They are inequitable, and they have significant democratic deficiencies. Direct payment Build America Bonds (BABs) provide an alternative, as they directly pay a cash subsidy to a subnational government. While there are simple technical problems that can easily be remedied, BABs face significant political hurdles that will prevent the permanence of the program. Policy entrepreneurship is a way forward. The piece also discusses how …