The municipal bond tax exemption emerged untouched Wednesday after a 17-hour House Ways and Means session on the tax portion of the Republicans' massive budget reconciliation bill.
The marathon mark up — and early Wednesday morning passage — of the $3.8 trillion tax legislation advances President Donald Trump's "big, beautiful bill" encompassing his domestic agenda. The municipal market for months worried that the tax portion would target muni bonds in part or whole, but reported feeling
Making it through the tax-writing committee marks another victory.
"The legislative debate is far from over but there is no question that there has been a huge accomplishment by the municipal bond community to escape the committee unscathed," said Charles Samuels of Mintz Levin, counsel to the National Association of Health & Educational Facilities Finance Authorities.
"There could be threats in House floor dynamics and in the Senate, of course, but an enormous effort both at the grassroots and in the Washington representation of public finance has resulted in continued protection of the marketplace," he said. "Certainly though in the nonprofit field, universities and hospitals are taking very significant hits, and that needs to be recognized as well."
As of Wednesday, a thorny dispute over the
Some market participants have said a SALT deal, which could be costly, may endanger the tax-exemption, if lawmakers who are looking for revenue see both as benefiting cities and states.
The tax bill calls for tripling the $10,000 SALT deduction cap to $30,000 for those with taxable annual income of $400,000 or less. Most of the SALT Caucus shot that down as inadequate, although Rep. Nicole Malliotakis, R-N.Y., who sits on Ways and Means, has reportedly agreed to the new cap.
Rep. Tom Suozzi, D-N.Y., introduced an amendment Tuesday evening that would have raised the SALT cap to $80,000 offset by raising top tax rate to 39.6% from 37%, a top rate that Trump has endorsed. The amendment failed on a party-line vote.
Rep. Brendan Boyle, D-Pa., offered an amendment that would require that the tax bill reduce deficits over a 10-year window on a
An amendment from Del. Stacey Plaskett, D-V.I., that would send increased transfers of excise taxes on rum imported from the U.S. Virgin Islands and Puerto Rico back to the territories seemed to generate some bipartisan support. The amendment was withdrawn without a vote.
Rep. Don Beyer, D-Va., criticized a provision that would allow the Treasury Department to strip organizations of their tax-exempt status if they are found to be supporting terrorist organizations. The move would allow the Trump administration to target its political enemies without public evidence or judicial oversight, Beyer said.
That provision could offer a "legal path to rescind the tax-exempt status of some higher education issuers," Charles Schwab noted in a Wednesday note. The overall bill doesn't feature any provisions that would materially alter demand for munis, the firm added.
The tax bill constitutes a $3.8 trillion tax cut through 2034, according to the Joint Committee on Taxation. Budget instructions gave the committee $4 trillion of tax cuts to work with, leaving Republicans with some room to negotiate SALT.
"There's a little bit of wiggle room there to try to deliver additional priorities but very small wiggle room," Committee Chair Rep. Jason Smith, R-Mo., said at a press conference before the mark up. "The issue is if we don't deliver on this every single American will face a 22% tax increase so failure is not an option."
Democrats on the committee painted the tax bill as benefiting billionaires over middle- and working-class Americans.
"Here we have one big beautiful tax cut for billionaires," said Ranking Member Rep. Richard Neal, D-Mass. The 2017 Tax Cuts and Jobs Act — which the reconciliation bill will make permanent — was a failure, Neal said. "Now they want to double down on the same failed playbook."
Neal also said he expects to see legislative changes.
"This is clearly an unfinished product," he said. "There is a long way to go, and my sense is that even many of the items that are included here, if this legislation moves out of committee in the next couple of days here, that it is likely to be altered substantially."
When the final panels approve their portions, all 11 pieces will move to the House Budget Committee. The budget committee, which can't make any bill changes, is set to meet Friday where it will assemble the pieces into one measure. The legislation would then head next week to the Rules Committee — which can make changes — before landing on the full House floor next week.
Senate Republicans have already flagged that they want to make changes to the legislation.
