Legislative / Policy Update
Senate Floor. Majority Leader Mitch McConnell wants the Senate this week to pass legislation providing federal aid for communities hard hit by natural disasters. Republicans and Democrats are close to finalizing an agreement on the legislation, but they’re not quite there yet. The outstanding issues reportedly deal with provisions unrelated to disaster aid, including humanitarian aid at the border and Senator Richard Shelby’s (R-Ala.) attempt to add language that would allow money that is in the Harbor Maintenance Trust Fund to be spent on harbor maintenance without counting against the budget caps. The White House opposes Shelby’s addition to the disaster bill. If Senators (and the White House) can reach an agreement and pass the bill this week, the House is hoping there will be time to take up the Senate measure and pass it before the Memorial Day recess.
House Floor. In addition to possible consideration of a disaster relief bill, the House is looking to pass legislation to encourage persons to save for retirement. The retirement bill will also be the vehicle for an amendment that will fix the “kiddie tax” problem caused by the 2017 tax-cut bill. In what has been described as an unintended consequence, the tax bill significantly increases taxes on the survivor benefits for children of service members who died on duty and on lower-income students with financial aid packages that include assistance for room and board. A manager’s amendment to the retirement bill will fix that problem.
Infrastructure. President Trump will meet Wednesday with House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer, and other Democratic leaders to discuss how to pay for an infrastructure package that could cost upwards of $1 trillion. After a news outlet reported that the President might be considering an increase in the gasoline tax, the White House moved quickly to assure conservative leaders that the President did not plan to endorse such an increase. Some conservative groups are said to be supportive of a proposal that would direct the Agriculture Department to sell distressed assets and then distribute half of the proceeds to communities below the poverty line for infrastructure projects.
Tax Policy. The leaders of the Senate Finance Committee announced May 16 that they were appointing bipartisan task forces to examine what to do about what’s commonly known as tax extenders, the package of various tax breaks that expire every couple of years and then are retroactively extended (accompanied by lawmakers’ laments that “this is no way to provide certainty for taxpayers” and pledges that “this is the last time we retroactively extend something that is supposed to incentivize future behavior”). Finance Chairman Chuck Grassley (R-Iowa) has been particularly vocal in calling for quick action this year to extend the expired tax breaks, often pointing to the importance of the biodiesel tax credit to his constituents in Iowa.
What is notable about this Senate exercise is that the task forces will be looking not only at the usual suspects, i.e., the 26 tax breaks that expired at the end of 2017 and three that expired at the end of 2018 but also at 13 that are set to expire at the end of this year. This group of 13 includes tax credits for solar and wind that are scheduled to be phased out and a two-year reduction in excise taxes on beer that was included in the 2017 Tax Cuts and Jobs Act.
The goal of this exercise is to develop permanent solutions that will provide long-term certainty for these 42 tax breaks, which could include scaling back, phasing out, or eliminating some of the incentives. The task forces have been asked to complete their work by the end of June.
Meanwhile, House Ways and Means Chairman Richie Neal (D-Mass.) is looking at expanding the extenders package, which mainly benefits businesses, to include provisions that would help low-income individuals, such as expanding the Earned Income Tax Credit. Neal is also reviewing options to offset the cost of an extenders package, including changing the taxation of “carried interest,” which benefits investment fund managers and real estate developers. In a question totally unrelated to tax extenders, President Trump was asked in an interview that aired Sunday night whether he still wanted to end the favorable tax treatment of carried interest. “I would like to do it. I will do it,” the President responded.
FY 2020 Appropriations. The full House Appropriations Committee will mark up four bills this week – Defense and Energy and Water on Tuesday and then Commerce/Justice/Science and Interior/Environment on Wednesday. On the Senate side, action is expected to start in early June with Appropriations subcommittee markup of the Labor/HHS/Education bill. While House appropriators are using top-line defense and non-defense numbers developed by the House Budget Committee, the Senate Appropriations Committee has not settled on its numbers. Committee Chairman Richard Shelby (R-Ala.) said he expects total discretionary spending to be higher in FY 2020 than 2019 because he wants more money for defense. This is not surprising, but it means that the Senate defense spending level, and possibly the number for non-defense, will be above the budget caps that limit spending for FY 2020 and 2021.
None of the appropriations bills will be enacted until Congress and the President negotiate a deal to raise the caps. On Tuesday morning, the four top Congressional leaders and their aides will meet with Administration officials to begin talks on the caps. Attending the session will be House Speaker Pelosi, House Minority Leader McCarthy, Senate Majority Leader McConnell, and Senate Minority Leader Schumer, as well as Acting White House Chief of Staff Mulvaney, Acting Office of Management and Budget Director Vought, and Treasury Secretary Mnuchin.
Committee Action of Note:
Pennsylvania Special Election. The special election to fill the vacated PA-12 seat due to the retirement of former Republican Rep. Tom Marino takes place tomorrow, May 21. The northern and central Pennsylvania seat is expected to be won by Republican State Rep. Fred Keller over Democrat Marc Friedenberg. Former Rep. Marino won the 2018 election over Friedenberg with 66% of the vote, the same margin of victory in the district for President Trump in 2016. The President will hold a rally tonight in the district.
23 Candidates. New York City Mayor Bill de Blasio officially announced his candidacy for President last Thursday. Mayor de Blasio will have some ground to make up on fundraising and polling to get onto the debate stage in June. Former Vice President Biden continues to lead polling by a wide margin, with Senators Sanders, Warren, and Harris and Mayor Buttigieg all averaging over 5% in the polls.
2019/2020 Gubernatorial Races. 2019 and 2020 will see 14 states vote for Governor. Five governorships are currently held by Democrats (DE, WA, NC, LA, and MT) and nine are held by Republicans (KY, MS, NH, VT, IN, MO, ND, UT, and WV). Kentucky, Mississippi, and Louisiana each have off-year state elections and will vote in 2019. Mississippi, Utah, and Montana will have open seats, while Washington could have an open seat depending on how far Gov. Inslee progresses in the Democratic presidential primary.