Congress packages hurricane aid with debt limit and stopgap spending
WASHINGTON – Resumption of state and local government series securities sales by Treasury and more time to consider tax reform are likely to be among the expected benefits of the hurricane aid, budget and debt limit deal reached by President Trump and lawmakers this week.
“The advance of another historic storm now makes the need for action even more urgent,’’ said Senate Majority Leader Mitch McConnell, R-Ky. “It will provide certainty and stability for first responders, state officials and the many others involved preparing for and recovering from these storms with critically needed emergency resources that will not be interrupted with the prospect of a shutdown or a default.’’
The package includes $15.25 billion in hurricane aid for victims of Harvey and Irma along with a 90-day deal on the debt limit and stopgap spending bill that will last through Dec. 8.
It contains $7.4 billion for Community Block Development Grants for infrastructure and housing, $7.4 billion for the Federal Emergency Management Agency, and $450 million for the Small Business Authority disaster loan program.
Treasury Secretary Steven Mnuchin said Thursday that the deal provides “more room to focus on taxes.’’
“I think that was a big win,’’ Mnuchin said on Fox Business News.
Congress “will have a runway to take some action,’’ said Chuck Samuels, an attorney at Mintz Levin and counsel to the National Association of Health and Educational Facilities Finance Authorities.
But experts don't expect Congress to complete work on tax reform in 90 days, the breathing room that was approved overwhelmingly by a vote of 80-17 in the Senate on Thursday. The legislation must still be approved in the House before it can be sent to President Trump.
Presuming the legislation makes its way to the White House and is signed by the president, the 90-day window could take air out of pending tax reform legislation in December.
Congress could “run up against a wall’’ in December, Samuels said.
House Republican tax writers “are very close’’ to releasing their template on tax reform, Speaker Paul Ryan said Thursday during a televised forum hosted by The New York Times.
The two congressional tax-writing committees in the House and Senate are expected to begin consideration of tax reform later this month, with public hearings to begin next week. The Senate Finance Committee has scheduled a hearing on individual tax reform for Thursday. Representatives will include two fellows from the American Enterprise Institute as well as someone from Pioneer Realty and Lily Batchelder, a professor at New York University.
Ryan said the template the committees will consider will propose effectively doubling the standard deduction which would offset the possible elimination of the state and local tax deduction for “middle income people.’’
The possible elimination of that deduction, known as SALT, is expected to be one of the major political battles in the debate over tax reform, with state and local governments fighting to keep it.
Groups such as the U.S. Conference of Mayors have been lobbying for the preservation of the SALT deduction with Republican House members representing states with high taxes, including New York and New Jersey.
Shorter term, Treasury could resume the sale of SLGS within 24 hours or so after President Donald Trump signs the 90-day deal.
“In the past, when the debt limit is raised, we reopen SLGS,’’ Treasury spokesman Bradley Benson said.
The SLGS suspension was among the extraordinary measures Treasury took in March when the last suspension of the debt limit expired.
SLGS are issued to assist state and local governments comply with federal arbitrage laws and regulations when they advance refund bonds or have money to invest from the issuance of their tax-exempt bonds.
Absent SLGS, issuers can invest bond proceeds in U.S. Treasuries, which are not as flexible as SLGS.