BondDesk Group: Federal Affairs Update

NALHFA 2013 Annual Education ConferenceSusan ColletSVP, Government RelationsApril 5, 2013

Federal Affairs Update

TimelineMarch 1 SequestrationLate March - FY 2013 CR Expired; new spending bills enactedLate March - Each Chamber passed disparate budget resolutionsMay 19 -Treasury must use extraordinary measures on debt ceilingAugust - Extraordinary measures exhaustedSeptember 30 spending bills expireConflicting DynamicsLegislation by trigger debt ceiling, no pay, sequestration, CRLegislation by regular order budget reconciliation process, tax reform Tax Reform

Working groups Charitable/Exempt orgs, Debt/Equity and Capitol, Education and Family Benefits, Energy, Financial Services, Income and Tax Distribution, International, Manufacturing, Pensions, Real Estate, Small Business/Passthroughs628% Limit on Deductions/Exemptions

MessagesRs: Tax revenues are only to bring down tax rates; spending cuts only, pleaseDs: More revenue is needed to bring down deficit

BUT.Wheres the grand bargain?Watch For:WH Budget 28% Cap; America Fast Forward BondsCranky Washingtonians afflicted by sequestrationReplace sequestration with what?Policy in a blender spreading pain/avoid accountability; who is willing to own a deal?Where are the rating agencies are revenue increases enough?GDP numbers

9Threats to ExemptionReplacement with taxable bonds?

Replacement with direct-pay or other federally subsidized bonds?

A limit on the exemption that targets high earners but affects everyone!Messages for PolicymakersCost-ShiftFederally Imposed Local Tax100-year PrecedentCompetitivenessStarving InfrastructureMarket ImpactsPerpetual tax risk for investorsProblems inherent with models like direct-payIssuance is down70 basis point increase

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