As part of a series of BDA discussions with key Members of Congress focused on issues of importance to the U.S. bond markets, the BDA hosted Congressman David Kustoff of Tennessee to discuss tax policy. Mr. Kustoff sits on the powerful House Ways and Means Committee and drives support for fixed-income in the tax-writing Committee which will play a pivotal role in next years tax debate.
Q: Tell us a little about your background pre-Congress and what led you into public service?
A: I am proud to say that I’m a West Tennessee man through and through. Born and raised in Memphis, I attended White Station High School in Shelby County and received my undergraduate degree from the University of Memphis. In 1992, I graduated from the University of Memphis Cecil C. Humphreys School of Law and began my legal career soon after.
Before I was elected to Congress in 2016, I worked as an attorney in the private sector and served in various roles for the Republican party. I was Chairman of the Shelby County GOP from 1995 to 1999, Chairman of Lamar Alexander’s successful run for U.S. Senate in 2002, and Tennessee Chairman of the Bush/Cheney presidential campaigns in both 2000 and 2004.
In 2006, I was honored to be appointed by President George W. Bush as the U.S. Attorney for the Western District of Tennessee. Following my confirmation by the United States Senate, I focused on cleaning up government corruption, fighting violent crime, and stopping the proliferation of dangerous narcotics in our communities.
After talking to my wife, Roberta, I decided to run for Congress. We both shared serious concerns about the state of our nation and sought a better future for our children. I believed my prior experiences, including my time in the private sector and serving as a U.S. attorney, gave me the necessary tools to represent West Tennesseans and fight for their values in Washington.
Q: From the outside looking in, Congress and DC in general looks pretty toxic and unproductive. From your experience as a sitting Member of Congress, is this view accurate? Has there been much bipartisanship in the 118th Congress?
A: There is no question that the legislative process can be slow and frustrating. By design, democracy can be messy, but that is not always a bad thing. Despite the hyper partisanship of today, there is still important work being done on a bipartisan basis.
Earlier this year, the House of Representatives passed the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) by a strong bipartisan vote of 357 to 70. This legislation included a variety of pro-growth, pro-family policies designed to boost U.S. competitiveness and help hardworking Americans. It restored immediate expensing for Research & Development (R&D) costs to support domestic innovation, expanded interest deductibility to help small – and medium-sized businesses meet payroll and grow, and extended bonus depreciation to allow businesses to fully deduct the cost of certain investments. H.R. 7024’s strong vote total shows there is still an appetite for bipartisan lawmaking and that Congress can get things done.
H.R. 7024 is just one example of bipartisanship in the 118th Congress. We also raised the federal debt limit and established new discretionary spending limits through the Fiscal Responsibility Act, passed a major national security supplemental package providing aid to Israel, Ukraine, and Taiwan, and fully funded the government for Fiscal Year 2024. All of these bills passed both the House of Representatives and U.S. Senate with broad bipartisan support and were signed into law.
Republicans and Democrats will always have significant disagreement over a wide range of policies. However, it’s important that both parties acknowledge potential areas of agreement and work together on behalf of the American people where we can.
Q: Can you talk about the status of your bill, the Investing in Our Communities Act (H.R. 1837), which would restore tax exempt advance refunding?
A: Advanced refunding has long been an important tool for state and local governments to invest in their infrastructure needs and more efficiently manage financial obligations. The bipartisan Investing in our Communities Act (H.R. 1837), which I introduced with my colleague Rep. Dutch Ruppersberger, will help finance the infrastructure that many of our communities rely on – bridges, parks, libraries, healthcare facilities, and schools, to name a few.
Right now, the Investing in our Communities Act has momentum. Its prospects for moving through the legislative process are strong.
Successfully passing tax legislation starts with the House Committee on Ways and Means, the oldest committee in Congress and the only one mentioned in the Constitution. Ways and Means has jurisdiction over a wide range of issues, most notably the tax code. As such, the prospects of any bill that modifies the Internal Revenue Code depends first and foremost on its level of support among committee members.
As a member of the Ways and Means Committee, I have worked throughout the 118th Congress to build support for the bill on the committee. Currently, six other Ways and Means members are cosponsors of the Investing in Our Communities Act. Overall, twenty members of Congress support the bill – ten Republicans and ten Democrats.
There is still a lot of work to be done. However, I’m confident that the Investing in Our Communities Act will receive consideration in due time and that our efforts to restore advanced refunding will be successful.
Q: Looking ahead to 2025, vast swaths of the Tax Cuts and Jobs Act of 2017 (TCJA) are set to expire, including all individual provisions. In recent weeks, projections have indicated extending TCJA would cost the federal government north of $4.5 billion, meaning there will be pressure on Congress to look for “pay-fors” in the tax code to help off-set these costs. Can you talk about what tax reform may look like next year, and what BDA members can do to advocate for policies important to the industry?
A: The Tax Cuts and Jobs Act of 2017 was the first major reform to the federal tax code in over 30 years. It changed individual income rates, the corporate tax rate, rules for estate and retirement planning, and taxes for small businesses. In the two years following the passage of TCJA, GDP growth was a full percentage point higher than the previous 10-year average, unemployment was at the lowest rate in 50 years, wages grew at a rate 4.9% higher than inflation, and household income rose by $5,000.
The data is clear: TCJA led to one of the strongest economies in U.S. history.
It’s important that the American people understand what is at stake next year. Allowing TCJA to expire will result in a significant tax hike on virtually every American taxpayer and businesses. In my Congressional district specifically, the average household could see an estimated tax hike of roughly $3,000. The successful extension of TCJA will be key to the United States’ long term economic health and American families’ ability to make ends meet.
Making sure taxpayers can continue to benefit from TCJA’s pro-growth policies is a top priority for House Republicans next year. However, tax reform in 2025 will ultimately depend on the outcome of November’s election. Everything is on the table – the temporary and permanent TCJA provisions, the Inflation Reduction Act (IRA) tax credits, international taxes, and even longstanding domestic taxes.
Stakeholders have an important role to play in tax reform next year. Feedback and input from industry will help Congress weigh the pros and cons of potential changes, determine priorities, and ultimately decide on what ideal legislation looks like. Lawmakers need to hear directly from BDA members about their priorities and why those priorities are important to the industry, consumers, and the American economy. Providing real world examples that highlight the benefits of any given policy is one particularly effective way to educate lawmakers and build support.
Among House Republicans, preparations for tax reform next year are well underway. That being said, the municipal bond industry needs to make its case to Congress now, and not later, to ensure its tax priorities are considered and protected come next year.
