Private Activity Bonds Background Currently, 70 percent of all bonds used to finance solid waste facilities are private activity bonds (PABs). The federal government treats interest income earned from these bonds as tax exempt. Businesses and individuals that invest in PABs can reap tremendous tax-free benefits. These bonds encourage state and local governments to build solid waste incinerator plants.
Green Scissors Proposal Subject tax-exempt bonds sold to finance waste incinerators to the private-activity annual volume cap. This requirement would save taxpayers about $600 million over five years.
Project Hurts Taxpayers Tax-exempt bonds in general distort investment decisions. Because the interest from the bonds is tax-free, wealthy investors buy them to shelter income rather than buying taxable corporate bonds or stocks. Furthermore, this kind of tax break violates the "polluter pays" principle. The creators of solid waste, not taxpayers, should pay for its disposal.
Project Hurts EnvironmentAlthough waste incinerators are called "renewable" energy facilities by the 1980 tax bill, incinerators are not environmentally friendly. They emit harmful levels of highly toxic substances such as cadmium, lead, and dioxins into the air. The EPA is completing the rule-making process regarding safe emission levels for incinerators. Providing tax benefits for the construction of incinerators before incinerators have met environmental standards is ludicrous.
$600 million