(Bond Buyer) President-elect Donald Trump’s return to the White House has placed public finance leaders on the defensive, as tax policy changes may impact the industry’s investor base, increase borrowing costs and stymie certain infrastructure finance opportunities. Looking to the past offers some insight into how the coming months may play out.
Republicans last controlled all three branches of the federal government in 2016, which led to the enactment of the Tax Cuts and Jobs Act the following year. The TCJA axed tax-exempt advance refundings and the state and local tax deduction (SALT). It also nearly killed tax-exempt private-activity bonds.
Matt Fabian, partner at Municipal Markets Analytics Inc., told The Bond Buyer’s Caitlin Devitt that the return to Republican control has once again given rise to significant challenges to the tax exemption .
“The muni lobby has improved the data that they have, they have improved the arguments for preserving the [tax] exemption and I think they’ve been preparing for this potential scenario for months,” Fabian said. “So if [the tax exemption] can be defended, they’ll do it.”
Industry groups like the Bond Dealers of America are increasing their focus on several legislative policies aimed at strengthening the muni market.
“Congress has been afforded the chance to reevaluate policy decisions made in 2017, and we urge them to further embolden Americas’ infrastructure by promoting municipal bonds, reinstating tax-exempt advance refundings, raising the bank-qualified limit, and exploring options to further utilize and expand private activity bonds,” Brett Bolton, senior vice president at the Bond Dealers of America, said in an interview with The Bond Buyer’s Scott Sowers .
Read more:A wary municipal market ponders post-election threats
Market leaders are looking for silver linings in the meantime.
In late November, Trump announced Scott Bessent as his nominee for Treasury Secretary. Bessent, founder of the Key Square Group hedge fund and longtime collaborator of financier George Soros, has muni and banking experts alike hopeful — and wary — of his chances for success.
“Scott Bessent is a great pick because he knows markets,” Chris Iacovella, president and CEO of the American Securities Association, said in an interview with The Bond Buyer’s Scott Sowers . “He will vigorously implement the president’s agenda, and he knows how to talk to the bond market. … All of those skills will be required to be the secretary of U.S. Treasury at this moment.”
Read on to dive into expert predictions of Trump’s impact on the markets and how leaders are preparing for changes in every direction.
Protection of tax-exempt bonds is top issue for public finance leaders
As public finance leaders continue to navigate uncertain waters in the markets, professionals are mindful of protecting the tax exemption and further promoting municipal bonds.
The Tax Cuts and Jobs Act of 2017 and the numerous provisions included in it that are set to expire later this year mean bond advocates are once again doubling down on “preserving and protecting all tax-exempt bonds during any attempt at tax reform,” Toby Rittner, president and CEO of the Council of Development Finance Agencies, said in an interview with The Bond Buyer’s Scott Sowers .
Industry associations like the Bond Dealers of America and the CDFA are also pushing to enact changes in the Farm Bill and the strength of the State Small Business Credit Initiative to better support developing rural communities.
