POLL NUMBERS OF THE WEEK: 50 – 42 %

Based on the latest NBC News/SM poll, Democratic presidential nominee Hillary Rodham Clinton is leading Donald J. Trump by 8 percentage points.

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Clinton’s lead shrinks to 5 percent, however, in a four-way match up with the addition of Libertarian candidate Gary Johnson and Green Party candidate Jill Stein.

Congress is set to return after Labor Day from its seven-week summer recess.  McGuireWoods’ tax policy team hopes our readers are enjoying their break away from eye-roll-inducing words like “tax reform,” “blueprint,” and “integration.”  But summer doesn’t last forever, so we’re here to help you ease into the September legislative session with a special August edition of the Tax Policy Update.  Regular distribution of the Tax Policy Update will resume Sept. 13.  Happy reading!

PRESIDENTIAL AMBITIONS: IT’S STILL THE ECONOMY, STUPID

The 2016 Republican and Democratic National Conventions were high-drama affairs.Balloons were dropped.  Celebrities gave their two cents.  History was made:  Democrats have their first woman presidential candidate in Hillary Rodham Clinton, and Republicans have Donald J. Trump, a first for the party for many other reasons.  Exciting stuff. 

After the party was over, Clinton’s and Trump’s teams went into full battle mode, turning up the heat on the campaign trail.  But for all the bluster, zingers, and counter-zingers, Clinton and Trump do see eye-to-eye on one thing:  the importance of the economy in a presidential election year.  Based on a June survey by the Pew Research Center, 84 percent of registered voters put the economy at the top of their issues list. 

Both Clinton and Trump made their case in Detroit, a city that knows well the harsh realities of rapid globalization and often bears the brunt of economic downturns.  The candidates delivered their visions of a stronger economy and a revitalized middle class, outlining policy initiatives in the areas of tax, infrastructure, energy, trade, and regulatory reform.  And though Clinton and Trump would agree on the need to put Americans back to work, their prescriptions for job creation, middle-class prosperity, and economic growth reflect two contrasting views of what’s ailing America. 

For Trump, America’s complicated tax code, big government, and bad trade deals are the key culprits of economic stagnation.  Accordingly, Trump’s “America First” economic plan promises to simplify the tax code, halt unnecessary federal regulations, and re-evaluate U.S. trade agreements.  Clinton, on the other hand, blames a broken socio-economic system:  one that rewards the wealthy while leaving hard-working Americans behind to fend for themselves against stagnating wages, growing debts, and an ever-evolving global economy, which tends to sideline blue-collar workers.  To fix this broken system, Clinton calls for additional tax credits for families and small businesses, a substantial reinvestment in infrastructure, and stronger regulation of Wall Street.  Clinton’s “Family First” plan also calls for equal pay, paid family leave, and raising the minimum wage. 

Tax Policy.  Tax talk from Clinton and Trump shows that comprehensive tax reform will land differently on their respective priority lists.  Clinton’s discussion of taxes focuses almost exclusively on creating and expanding tax credits, closing loopholes, and making the wealthy pay their fair share.  The Democratic candidate hardly talks about a full-scale reform on the campaign trail.  For another indicator that comprehensive tax reform may not be a priority under a Clinton Administration, one only needs to skim the 2016 Democratic Party Platform, which reveals a lack of urgency for such an undertaking in the near-term.

Trump, like House Republicans, has put comprehensive tax reform front and center this election season — it is at the top of his economic plan.  Trump and Republicans see tax reform as essential to economic growth.  And since the release of his original tax policy proposal at the outset of the presidential race, Trump’s tax plan has evolved, inching closer to the House Republicans’ tax blueprint.  Party unity anyone?  Under a Trump Administration, expect almost all the necessary pieces and figures to move into place for an earnest attempt at tax reform in 2017. 

To help our Tax Policy Update readers get smart, below is a high-level comparison of the candidates’ tax proposals: 

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Other Policy Priorities.  It is worth noting that both Clinton and Trump have also spent a great deal of time on the campaign trail talking about infrastructure — another point of convergence for the Democratic and Republican presidential contenders.  Clinton has promised to put Americans back to work by boosting investments in infrastructure.  In addition to surface transportation projects, Clinton wants to modernize the nation’s power grid and expand broadband access.  Clinton’s infrastructure-building plan calls for $275 billion of direct spending over five years, as well as $225 billion in loan programs.  Trump said he would double Clinton’s numbers to help America build again.  His $1 trillion promise has irked conservative Republicans who oppose big government spending on public works.  The big question, of course, is how such ambitions will be funded.  Securing a consistent source of funding for infrastructure projects has been a perennial challenge for lawmakers.  Clinton said she would establish a national infrastructure bank.  Trump would create new government bonds to fund such projects — not unlike the “Build America Bonds” introduced by Democrats earlier this year. 

Based on their economic speeches, another high priority item for both candidates is federal regulatory reform.  For Clinton, this means strengthening the Dodd-Frank Actto encourage responsible risk-taking on Wall Street and to strengthen accountability in the financial services industry.  To stop corporate inversions, Clinton has said she would not shy away from empowering the regulatory agencies to take action.  Like a good Republican, Trump plans to rein in the federal regulatory agencies, which he blames for slowing America’s economic recovery.  Trump announced that, as president, he would put a temporary halt to new agency regulations. 

TRANSITION TEAM TRYOUTS:  WHO MADE THE CUT?

CLINTON TRANSITION TEAM

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TRUMP TRANSITION TEAM

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115TH CONGRESS:  A WISH LIST

Legislative achievements in the 115th Congress will depend on who is sitting in the White House after Jan. 20, 2017.  Democratic and Republican lawmakers will have their own wish lists for the new Congress. 

Look for Republicans to prioritize key items in the House GOP’s A Better Way agenda: 

  • Comprehensive tax reform
  • Repeal of the Dodd-Frank Act
  • Repeal of the Affordable Care Act
  • Reform of the federal regulatory process
  • Reform of the annual congressional budget process

Democrats will likely focus on the following issues:

  • Infrastructure
  • Tax cuts and expansion of tax credits for middle-class families
  • Strengthening consumer protection and oversight of Wall Street
  • Affordable housing
  • Immigration

Let’s get real.  Bipartisanship may be a lost art these days, but there is an issue where Democrats and Republicans can come together to work out an agreement:  regulatory relief for community banks.  Both parties generally agree that small banks should be exempt from the more onerous requirements of Dodd-Frank.  An opportunity to pass a narrow, tailored relief bill fell by the wayside in the 114th Congress due to ideological differences between Democrats and Republicans.  As a refresher, Republicans wanted relief for community banks to be part of a broader bill overhauling Dodd-Frank.  High-noon drama ensued as Democrats on the Senate Banking Committee categorically rejected Chairman Richard Shelby’s Financial Regulatory Improvement Act (S. 1484) and offered their alternative bill, the Community Lender Regulatory Relief and Consumer Protection Act (S. 1491).  Given that most of the legislative pieces are in place, if Democrats and Republicans can briefly set their ideological gripes aside, expect regulatory relief for community banks to pass Congress next year.    

Who’s controlling what?  On the Senate side, 34 seats are up for grabs this year, and based on the latest polls, Senate Republicans have a fight on their hands to retain control of the chamber in the 115th Congress.  State and national polls give Democrats a slight edge: the latest estimates show that Democrats have about a 60 percent chance of winning the upper chamber.

Democrats will need to gain at least five seats to win control of the upper chamber.  Here’s a breakdown of the Senate numbers:

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On the House side, Republicans will likely retain their majority, as Democrats are expected to come up short in their quest to add 30 seats needed for control.  Here’s a breakdown of the House numbers:

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114TH CONGRESS:  A TO-DO LIST

But before lawmakers can even start on their wish lists for the next Congress, there are some big-ticket items to wrap up in this current session — namely, appropriations.

When the Senate returns Sept. 6, members will try once again to invoke cloture on the FY2017 Milcon-VA conference report, the spending bill that includes funding for Zika.  The upper chamber will also vote to proceed to the consideration of the FY2017 Defense appropriations bill. 

Despite the Senate’s last-ditch effort to pass these individual spending bills, Congress will most certainly have to pass a continuing resolution (“CR”) to keep the federal government running beyond Sept. 30, the end of the current fiscal year.  Lawmakers face two big decisions on appropriations:  (1) the length of the CR and (2) whether to pass another omnibus appropriations package for FY2017.  Generally speaking, Democrats would like the CR to go until early December, which would then give the president and Congress an opportunity to work on an omnibus bill.  Some Republicans, however, would prefer a CR that goes into early 2017, giving the new Congress and administration the power to set spending priorities for the new fiscal year.

As a refresher, below is a list of appropriations bills that have been taken up by either the House or Senate before the summer recess break:

Click here to view table.

The other big question is whether Congress will attempt a vote on the Trans-Pacific Partnership (“TPP”) trade agreement.  A vote on the implementing legislation before the November elections is almost a non-starter — Senate Majority Leader Mitch McConnell has said as much earlier this year.  The Obama Administration has been making a hard push to get this agreement ratified by the end of the year.  However, due to the hostile rhetoric on the presidential campaign trail against TPP, a vote during the lame-duck session may prove difficult.  Additionally, before any vote can take place, Congress will need to hold public hearings on the trade pact.  And given the tight legislative schedule in the fall, finding the time for debate will be tough.   

Also up in the air is the energy bill conference.  Just before departing for summer recess, the Senate voted 84-3 to proceed to conference after much haggling with the House negotiators.  It remains unclear, however, when the conference committee will actually gather to resolve the differences between the House and Senate energy bills.  Earlier this year, the Obama Administration issued a veto threat against the House bill, opposing provisions that undercut the administration’s efforts to promote energy efficiency.  The administration is also against the provisions that would expedite the federal permitting process for natural gas pipelines and the LNG exports approval process, among other things.