Congressional Republicans are rushing to advance the crown jewel of President Donald Trump’s legislative agenda — a sweeping tax, energy and border package that they hope will be a boon to businesses and offset the tariff-induced economic turmoil of recent weeks.
But financial firms are watching warily as they lobby lawmakers not to turn Wall Street into a pay-for in the reconciliation package.
A variety of proposals that could eliminate tax breaks used by financial institutions are on the table as Republicans look to pay for tax cuts that Trump has promised. The coming weeks are poised to test GOP lawmakers’ willingness to defy some of their traditional allies in the business world to deliver the “one big, beautiful bill” Trump wants.
The House Financial Services Committee — which oversees Wall Street and its regulators — voted along party lines late Wednesday to approve its portion of the reconciliation package after a nine-hour markup. The legislation, which will be wrapped into the broader reconciliation package, would slash the amount of funding the Consumer Financial Protection Bureau can get by almost 60 percent and fold the U.S.’s top audit watchdog, the Public Company Accounting Oversight Board, into the Securities and Exchange Commission.
Democrats on the panel threw up procedural hurdles to slow the meeting down and offered dozens of amendments that Republicans voted down.
Financial Services Chair French Hill (R-Ark.) said he expects the savings produced by the legislation to exceed the $1 billion in cuts that the panel was required to produce by a budget resolution adopted by both chambers of Congress. But those savings remain a small fraction of what Republicans need to produce to pay for the Trump tax cuts. All eyes are on Congress’ tax-writing committees — House Ways and Means and Senate Finance — which are considering an array of more controversial savings proposals.
Several targets that could touch financial services firms are on the table. Tax writers are expected to release an initial proposal in the coming weeks, but the dynamics could change as the reconciliation bill moves forward and lawmakers look for additional savings.
Most controversially, the Ways and Means panel is weighing whether to close the so-called carried interest loophole, a controversial tax break that gives favorable treatment to the profits earned by private equity firms, hedge funds and venture capital investors. The latest signals suggest Hill Republicans may be souring on the idea, but conversations among tax writers are ongoing. Any effort to kill the tax break would be met with opposition from more business-friendly members, including on Financial Services. Hill told MM last week that the policy “is a major source of economic growth, jobs, that impacts every community in the country — it’s not a loophole.”
Hill and other Financial Services Republicans are also pushing tax writers not to strip municipal bonds of their tax-exempt status. They wrote in a letter to Ways and Means Chair Jason Smith last month that the exemption is “a critical tool that has underpinned American infrastructure and community development for over a century.”
Finally, the U.S.’s credit union lobby is playing defense as lawmakers face calls to strip the institutions of their tax-exempt status — a major lobbying push for community banks. Jim Nussle, the president of America’s Credit Unions and a former Republican lawmaker who chaired the House Budget Committee in the early 2000s, said the industry is “in a strong position going into this.”
But some credit union advocates — like lobbyists representing other segments of the financial services industry — worry that a last-minute deal could put them on the chopping block.
“We take nothing for granted,” Nussle said.
