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CUE THE SMOKE-FILLED ROOM: The House voted to move to Conference Committee, naming Ways and Means Chair Kevin Brady (R-TX) and Representatives David Nunes (R-CA), Peter Roskam (R-IL), Diane Black (R-TN), and Kristi Noem (R-SD) as the conferees. Freedom Caucus members nearly prevented the procedural move and derailed the tax bill in an attempt to get more power over the year-end spending bill. The Senate has delayed their motion to proceed while preoccupied with an omnibus spending bill. We expect Senate Majority Leader Mitch McConnell to select the quiet leaders of the tax debate so far: Finance Chair Orrin Hatch (R-UT) and Senators Rob Portman (R-OH), John Thune (R-SD), Tim Scott (R-SC), and Pat Toomey (R-PA). The Conference Committee could bump up against their expected recess on December 15 or even keep them in until Christmas, but the behind the scenes deliberations between the two Chambers have moved the two bills closer together and could speed the process.
RUBIK’S REDUX: There are still key differences that need to be resolved - House leadership is insistent the corporate AMT must be repealed. They also want reforms to be permanent and focus on middle-class cuts over the top individual bracket. The Senate wants to see everyone’s taxes lowered, the Obamacare mandate repealed, and preservation of a number of deductions (mortgage interest). The House has a delicate balance with many Republicans from high tax states threatening to vote against the package, and the Senate had a hard enough time appeasing 51 Senators the last round - with Senator Susan Collins (R-ME) already doubling her request for health provisions. Here is what we see in the final report:
- Expanding child tax credit to $2K
- Doubling the standard deduction
- Doubling the threshold for the estate tax
- Increasing the threshold on QBI for the pass-through deduction to 23%
- Eliminating the ACA individual mandate
- Preserving the property tax deduction up to $10K (SALT)
- Creating a repatriation tax of 7% and 14%
A BROKEN SYSTEM: The political implications of a government shutdown are almost as severe as the budgetary ones and they have become all too common in the divisive political landscape of the past decade. House Republicans plan to introduce a two-week stop-gap measure to expand the CR until December 22 instead of December 8 with only Republican votes. The measure would also include funding for the children’s health insurance program that has not been reauthorized. The problem with extensions is that they prevent defense spending from beginning any new projects - fiscal hawks are one of the toughest groups to win over and if the stop-gap measure (even a six-week) doesn’t include a deal for defense (full years worth of Pentagon funding) it won’t happen.
A JUGGLING ACT: The Senate is looking to pass an omnibus spending bill based on the minibuses the House passed earlier this year. However, an omnibus would require raising the budget caps for defense spending. Historically, these measures need some bipartisan support to put them over the edge, and this month’s spending measure will be highly political. 53 Representatives from California are demanding $4.4 billion in wildfire relief funding alongside request from Florida and Texas for supplemental hurricane relief. And Democrats are still adamant on a DACA deal, though agreed to meet with the president on a resolution this week.
CHECK OUT OUR LATEST UPDATE WITH DAVID HOPPE ON TAX REFORM AND GOVERNMENT SPENDING HERE.
ODDS OF LEGALIZED SPORTS BETTING JUST IMPROVED (MGM, WYNN, LVS, CZR, DIS, FOXA, CMCSA, CBS, TWX): Our Senior Telecom Analyst Paul Glenchur wrote from inside the Supreme Court that SOCTUS will probably rule that existing federal law does not prevent states from lifting bans on sports betting. Read the full piece here.
10 THINGS HEARD AT REAGAN NATIONAL DEFENSE FORUM: Our Senior Defense Analyst Emo Gardner writes that the invitation-only National Security forum at Reagan Library is a premier event for government, industry, and analysts. Read what he heard at the event here.
CALL REPLAY: OPEC – THE DAY AFTER AND WHAT'S NEXT: Our Senior Energy Analyst Joe McMonigle hosted a flash call from Vienna to go over OPEC’s decision and other outcomes from the week. Listen to the replay here.
AT&T/TIME WARNER HEAD TO COURT NEXT WEEK (T, TWX): Our Senior Telecom Analyst Paul Glenchur writes that Judge Richard Leon is a conservative who could display skepticism toward DOJ's case to block the T/TWX deal. Read the full piece here.
