OUR CALL WITH DAVID HOPPE TODAY WILL BE DELAYED. We are on standby waiting for tax legislation to drop tomorrow instead of today as planned. We expect the call to take place at the same time tomorrow, November 2nd 2:30 PM ET. Get the event details here.
TAX EXTENSION: House Ways and Means has delayed the release of their draft tax legislation, while they continue to hammer out final details and fill what we hear is a $300B gap. Chairman Kevin Brady said he, Speaker Paul Ryan, and President Trump made the decision to move it to Thursday. While anticipation and angst are building over the release of the draft, we’re not surprised by a delay of a day. Should the release extend beyond this week, well, that’s a different story and the already aggressive timeline Republicans have planned will likely be impaired. This is tax reform and no one expects it to be a walk in the park. The Committee's main pressure points are SALT deductions, 401(k) changes, and income brackets. It appears they have decided against phasing in a lower corporate rate, but may phase-in the elimination of the estate tax - there is also uncertainty about where a repatriation tax holiday rate would fall. While House leadership is worried about it not “favoring the wealthy,” they also know whatever bill they finalize will be recalibrated to pass the Senate.
SO WHAT’S THE DEAL WITH SALT: Chairman Kevin Brady and Republican members from high tax States have not reached a deal on what to do with the SALT deduction. Eliminating the deduction was an important part of paying for the cuts in the framework (to the tune of ~$1.5T) and is something many conservatives find necessary to rein in excessive State taxes. Those members (mostly from NY, NJ, and CA) are not just lobbying Brady - they are pressuring their Governors to lower State taxes as well. They want the tax overhaul to be both Federal and State efforts. It appears the business interest and the income tax deductions are off the table - but leadership seems open to compromising on State and local property taxes.
SIDEBAR: Brady also is not interested in repealing the Obamacare mandate with tax reform. Referring to the push by Senator Tom Cotton (R-AR), Brady doesn’t want to muddy the already complex tax reform issues with the health care debate.
RAINY DAY PLAN?: Democrats have been vocal with regard to one aspect of the Republican tax framework - the option to reduce 401(k) contributions. Republicans have been debating reducing the 401(k) pretax contribution cap from $18,000 to ~$2,400 to increase up-front tax revenue. Democrats have come up with a proposal that aligns with President Trump’s comments about 401(k)s - they would increase the 401(k) contribution cap from $18,000 to $24,500, give tax credits to employers who match retirement plans, and create a new IRA structure for those without employer plans. The president has spoken multiple times about the importance of 401(k)s to middle class families, but House Republicans are still debating how to solve the issue. Leadership sees reducing the cap as an easy pay-for, but others find the contribution vital to middle class savings.
WHILE ALL THIS WAS HAPPENING: Under the stories of terror in NYC, tax reform, establishment retirements (House Financial Services Chairman Jeb Hensarling (R-TX)), and Russia - the U.S. International Trade Commission unveiled a set of recommendations for the Administration in response to the national security threat from foreign solar production subsidies. They are recommending a quota on imports and tariffs up to 35%. This is almost entirely directed at China. While many in the American solar industry fought hard for these recommendations, giving the Administration a way to penalize China’s trade habits like they have been gunning for, not all U.S. companies were happy. Utilities and commercial purchasers of solar panels fear that the tariff will jolt prices. Once the recommendations hit the president's desk, he will have 60 days to decide what to do - but this is sure to be discussed when he goes to China this Friday.
SPOOKY TIMES FOR TECH TITANS (FB, GOOGL, TWTR, AMZN): Our Senior Telecom Analyst Paul Glenchur writes that tech titans will take the heat for Russian political ad buys at a Halloween hearing on Capitol Hill. Ominous, but mostly benign for now. Read the full piece here.
OPEC OPTIONS TRACKER & BASE CASE FOR NEXT ACTION: Our Senior Energy Analyst Joe McMonigle writes Saudi/Russia are pushing a nine-month extension, but other producers cool to full year of cuts. Minimum action is three-month extension of the deal. Read the full piece here.
T-MOBILE/SPRINT PROBLEMS? FCC INFRASTRUCTURE PUSH GAINS IMPACT (TMUS, S, AMT, CCI, SBAC, ZAYO): Our Senior Telecom Analyst Paul Glenchur writes that if reports are correct that T-Mobile/Sprint talks have collapsed, the FCC's wireless infrastructure push gains added significance. Read the full piece here.
WHO NEEDS CONGRESS? HHS PROPOSES RELAXING CY 2019 ACA-MANDATED BENEFIT DESIGN: Our Senior Health Analyst Emily Evans writes that more State flexibility in meeting EHB requirement won't change covered services; could reduce generosity & increase affordability of plans. Read the full piece here.
UNREQUITED EXAS BEARS: SORRY, TRUMP ADMIN APPROACH TO INSURANCE MANDATES NOT YOUR CATALYST EITHER: Our Senior Health Analyst Emily Evans writes that the Trump Administration’s efforts to relax the insurance mandates in the individual and small group markets not likely to affect coverage of EXAS. Read the full piece here.
ANNOUNCING OUR NEW LEGAL CATALYSTS VERTICAL WITH PAUL GLENCHUR: We are pleased to announce the launch of our new Legal Catalysts vertical, highlighting key cases and legal developments with significant potential impact across multiple sectors. Paul Glenchur, our longtime telecom and media analyst, but also a former federal appellate court law clerk, attorney, and member of the Supreme Court Bar, will lead this research offering. Check it out here.
