Leadership Comes into Focus in Key Tax and Financial Services Committees
While Congressional results are still trickling in, it seems at this juncture Republicans will hold both Chambers of Congress and the White House. The only outstanding question is by how large (or small) of a margin. The House majority will likely remain in the single digits, complicating efforts for robust legislating in the 119th Congress. While Senate Republicans will have a majority of at least 53 seats with 2 races yet to be called.
Regardless of margin, tax and regulation will be a main focus next year with broad swaths of the 2017 Tax Cuts and Jobs Act expiring, opening the door for sweeping changes to the tax code, and creating jeopardy for the tax-exemption and other fixed-income products.
With these data points, we have compiled a Committee outlook for next Congress including Republican Leadership and key names to follow and how they may impact fixed-income:
House
House Republicans are expected to vote on Leadership following the Veterans Day holiday next week. It is widely expected that Speaker Johnson (R-LA) will retain control, however as noted and shown last Congress, with such tight margins, surprises are possible.
House Committee on Ways and Means
All indications point to Chairman Jason Smith (R-MO) to retain the gavel in the powerful tax-writing Committee. Continuity is key as the Committee turns to the vast expirations of the 2017 Tax Cuts and Jobs Act, where they will be expected to initiate deliberations in next years tax debates. Because of unified control, we expect the House to start deliberating the massive tax bill early in Q1 of 2025.
Mr. Smith has been agnostic towards fixed-income, however it should be noted that he does often give outsized voice to his rank-and-file Membership, paving the way for Leaders and muni champions to play a pivotal role in negations.
Other names to watch include:
- David Kustoff (R-TN) who has co-sponsored legislation to fully restore tax exempt advance refundings;
- Mike Kelley (R-PA) who chaired the Community Development Tax Writing Team that covered municipal finance;
- Brian Fitzpatrick (R-PA) is a sponsor of Rep. Kustoff’s advance refundingslegislation; and
- Claudia Tenney (R-NY) is a sponsor of Rep. Kustoff’s advance refundingslegislation.
House Financial Services Committee
Unlike Ways and Means, the HFSC Leadership race remains open, with many sitting Members jockeying to replace Chairman McHenry (R-NC).
Potential successors include:
- French Hill (R-AK);
- Andy Barr (R-KY); and
- Bill Huizenga (R-Mich.)
All candidates are well liked by their colleagues, and successful fundraisers, so at this time is it premature to make a call on who is likely to win the gavel.
It is widely expected that regardless of Leadership, the Committee will place a strong emphasis on deregulation efforts, as well likely focus on market structure, working with the yet-to-be-named SEC Chair.
With unified control, the Committee will likely put oversight on the back burner, in place we expect broad retrospective reviews of the current Administrations rulemaking, opening the door for BDA input on current issues impacting the market.
Senate
The race of Majority Leader in the Senate remains the focal point of intrigue in DC. The race is down to 3 sitting Senators, with no clear favorite at this time.
The leading candidates are:
- John Thune (R-SD);
- John Cornyn (R-TX); and
- Rick Scott (R-FL)
Senate Finance Committee
Senate Finance is expected to be led by Senator Mike Crapo (R-ID) who has led Republicans on the Committee since 2021. Mr. Crapo is no stranger to fixed-income, previously introducing legislation to raise the bank qualified limit, as well worked extensively on S.2155 the massive bipartisan bank reform Economic Growth, Regulatory Relief, and Consumer Protection Act which included certain municipal bonds being named level 2B high quality liquid assets under the Liquidity Coverage Ratio.
Much like its House counterpart Ways and Means, the Senate Finance Committee will play an outsized role in developing and passing the likely tax bill next year. It should be noted that the Committee went to bat in 2017 to save Private Activity Bonds which were fully eliminated in the House, and has shown some interest in reinstating tax exempt advance refundings.
Some rank-and-file names to know include:
- John Cornyn (R-TX) if not elected Majority Leader will remain a Senior Member of the Committee. It should be noted that Mr. Cornyn was the loudest voice in the Senate in defense of PABs; and
- John Barrasso (R-WY) sponsored the LOCAL Infrastructure Act that would fully restore tax-exempt advance refundings.
Senate Banking Committee
Senator Tim Scott (R-SC) is expected to take over the gavel in the Senate Banking Committee. Mr. Scott has been very vocal in noting that his focus will be a sweeping de-regulatory agenda.
He has stated publicly that he plans to focus on banking policy framework that could tackle priorities like regulatory rollbacks, agency oversight and financial literacy. He has also long been a proponent of expanding affording housing policies and plan to advance legislation he introduced last month that would overhaul various HUD policies, including by allowing more private investment in affordable housing and expanding a program that ties affordable housing to work requirements.
Opportunity Zones will also be a topic to follow as he was the lead sponsor in their 2017 passage.
Additional names to follow:
- Mike Rounds (R-SD) who introduced legislation to name munis as High Quality Liquid Assets;
- John Kennedy (R-LA) a vocal skeptic of certain forms of municipal finance, including disclosure;
- Katie Britt (R-AL) who is a co-sponsor of Senator Wickers (R-MS) advance refunding legislation; and
- Cynthia Lummis (R-WY) who is a co-spnosr of Senator Wickers advance refunding legislation.
