CALL WITH DAVID HOPPE TODAY. With tax legislation back on track to drop this morning at 11:15AM, we will resume our plan and will host a CONFERENCE CALL TODAY at 2:30 PM with former Chief of Staff to Speaker Paul Ryan, JT, and Emily Evans on the rollout of this first look at tax reform. Get the event details here.
HOUSTON’S OWN: Tax writers were scrambling on the Hill the past two nights to put together a tax draft Republican members can unify behind. House Ways and Means Chair Kevin Brady (R-TX) plans to publish the Chairman’s Mark today at 11:15 AM. House Republicans are meeting behind closed doors to discuss the draft at 9:00AM and it won’t be long before the elements of the draft trickle out. The bill is set to include the main provisions of the Big Six’s framework such as lower rates, simplification, and eliminating deductions and credits, but also; lowering the pass-through entity rate from 39.6-25%, a deal on the SALT deduction, making corporate rates permanent, and enacting a minimum tax on U.S. companies that move operations abroad and sell back to the U.S. No or minor changes are expected to 401(k)s. Once Brady releases the details to the tax overhaul, he is allowing for a two-day comment period from House members until he finalizes the draft for the House Ways and Means Committee with the markup beginning next Monday, November 6th. Despite divisions in the party on certain provisions, all Republicans want to get to “yes” and are thus willing to compromise.
THEN IT’S SENATE'S TURN: The Senate has been working on their own bill which is expected to be released next week. While Republican leadership has been very strategic in engaging both Chambers and Administration officials and finding as much common ground as possible - there are sure to be differences. Senate Finance Chair Orrin Hatch (R-UT) made it clear that the Big Six’s framework was simply guidance for his Committee. The Senate is a different beast than the House - they have stricter (and quirkier) rules, a slimmer majority, and more political pressure to be centrist. Whatever passes the House, expect it to be watered down with things like a corporate rate phase-in, not eliminating the estate tax, and expanding the earned income tax credit instead of the child tax credit. Without all of these changes, the package can be spun to “favor the rich” a message Republicans simply can’t afford.
THE CUT, CUT, CUT ACT: Even though only two Chambers vote on a bill, one man signs it into law and President Trump has an agenda and a strategy all his own. He tries to help by treating the two Chambers differently the way he did on health care, but often creates headaches for them. Not to mention the tweeting - mocking Congressional Republicans, supporting removing the Obamacare mandate, and contradicting them with “no changes to your 401(k).” Expect him to encourage the House to deliver a conservative bill and then throw a rose garden party for them passing it. Then expect him to encourage the Senate bill to have “more compassion” and aim cuts at the middle class. It’s an interesting time, but Republicans of all stripes love tax reform and they are gunning to get this done, regardless of personality feuds.
CHIPPING AWAY: Despite most the oxygen in the House going to tax reform this week, they are set to vote on a five-year Children’s Health Insurance Program (CHIP) funding bill. Neither Chamber has addressed the program since the last bill expired at the end of September. An easily bipartisan topic - the House bill has no Democratic support and will likely pass on party lines. The Senate, however, is working on their own bipartisan measure with Finance Chair Orrin Hatch (R-UT) and Ron Wyden (D-OR). Once they release their legislation it will be hard to schedule a vote over the next 20 legislative days when December 8th hits - and Senators will have to confront looming deadlines including the expiring CR, the National Flood Insurance Program, and now even the debt-ceiling sooner than expected, all during the final tax reform stretch.
SCALES FALL FROM EYES: CURRENT U.S. NUCLEAR RECAP PROGRAM COSTS $1.2T. BA, NOC, LMT, RTN ON ALERT: Our Senior Defense Analyst Emo Gardner writes that the sum of all "budget safe" U.S. nuclear programs is not affordable and sooner or later will have to be reduced. Read the full piece here.
DID THE HOSPITAL LOBBY JUST GET OUT DONE BY HOME HEALTH? MY THE MIGHTY HAVE FALLEN: Our Senior Health Analyst Emily Evans writes the Home health Groupings model is now on an indefinite timeline; 340B program changes mean some real challenges for NFP hospitals; TKA off IPO. Read the full piece here.
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.
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.
