Less than 1 percent of the subsidy payments owed to city, state and local governments for the Build America Bonds stimulus program have been withheld, according to the U.S. Treasury Department.
"Despite over $120 billion of BABs issuance to date, hardly any payments have been offset," said Assistant Secretary for Economic Policy Alan Krueger in a speech to be given to the National Association of State Treasurers.
"Only .05 percent of total BABs subsidy payments requested by states have been offset because of outstanding tax debts owed to the IRS," he said.
The taxable bonds, created as part of last year's economic stimulus plan, pay issuers a federal rebate of 35 percent of interest costs. Lured by such a steep subsidy, issuers have brought more than $120 billion to market since the first BABs sale in the spring of 2009. But recently some states, notably Florida, have raised concerns about federal offsets.
The payments are treated as tax refunds, which means that the federal government checks if a state owes it money and then deducts that amount from the refund. According to Krueger of the total $626.45 million in BABs subsidy payments issuers have requested, some $626.15 million has been paid.
© 2022 Thomson/Reuters. All rights reserved.