Policy/Legislation
Pelosi Pushes Massive Tax and Spend, Infrastructure To House Votes: The Wall Street Journal reports that House Speaker Nancy Pelosi pushed for a vote today on the party’s massive tax increase, social spending and climate package, knowing negotiations among Democrats will evolve further if the measure passes and goes to the Senate. Any Senate changes would have to come back to the House for another vote. Pelosi told House Democrats on Thursday that she hoped the House would vote on the larger bill first and then vote on the Senate-passed infrastructure bill, sending that bill to President Biden. Progressives have been blocking the roughly $1 trillion infrastructure bill until they were satisfied with the language in the tax, social and climate bill. Changes to the tax and spend bill continued until Friday morning as Democrats tried to round up enough votes to pass it.
Manchin Criticizes Democrats’ Tax and Spend Package: The Wall Street Journal reports that Sen. Joe Manchin (D-WV) criticized Democrats’ $1.85 trillion tax and spend healthcare, education and climate-change bill and withheld his support for a legislative framework that the White House had cast as a consensus acceptable to all members of the Senate Democratic caucus. Manchin, whose support Democrats will need to pass the legislation through the 50-50 Senate, plunged the fate of the bill back into uncertainty. He urged delay and raised concerns about its possible impact on the national debt and inflation and attacked the decision to fund many programs on a temporary basis, saying that the legislation could be “a recipe for economic crisis” if its programs are funded for longer. “What I see are shell games, budget gimmicks” that could double the cost of the bill if the programs were extended permanently, Manchin said.
House Moderates Wanted Delay: Roll Call reports that a group of five moderate Democrats (enough to defeat the tax and spend reconciliation bill on a floor vote)— Reps. Ed Case of Hawaii, Stephanie Murphy of Florida, Jared Golden of Maine, Josh Gottheimer of New Jersey and Kurt Schrader of Oregon — sent House Speaker Pelosi a letter Tuesday urging her to only bring a bill to the floor that leaders “have a strong level of confidence” will pass the Senate. The five members also said they wanted 72 hours to review the final bill text, as House rules require, and to see the Congressional Budget Office and Joint Committee on Taxation scores providing spending and revenue estimates of the legislation. The CBO estimates could take another two weeks to complete.
True Cost of Biden Budget Nearly $4 Trillion: The Wall Street Journal reports that the true cost of President Biden’s new budget outline is not $1.75 billion, and is actually closer to $4 trillion. “The blueprint the White House released is more frame than work,” The Journal says. “The jerry-rigged plan is an enormous expansion of government with quarter-baked entitlement programs that will retard work and $1.85 trillion in tax increases that will distort and limit investment. The $1.75 trillion cost that Democrats have assigned their bill is an illusion. They use phony accounting to finance a few years of new spending with 10 years of tax increases. The real cost likely to be closer to $4 trillion.”
New Analysis of House BBB Bill Shows Higher Taxes, Fewer Jobs and Growth: The Tax Foundation estimates that the tax provisions, IRS enforcement, and drug pricing provisions in the House tax and spend bill would result in a net revenue increase of about $768 billion, at least $1 trillion less than the bill’s estimated cost. The non-partisan foundation estimated Tuesday that the House bill would reduce long-run economic output by nearly 0.4 percent and eliminate about 107,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for the top 80 percent of taxpayers over the long run. Under the bill, the average top tax rate on personal income would reach 57.4 percent, giving the U.S. the highest rate in the Organization for Economic Co-operation and Development (OECD). All 50 states plus the District of Colombia would have top tax rates on personal income exceeding 50 percent.
PRO Act Provisions Trimmed But Not Eliminated: The National Law Review reports that some of the most significant PRO Act-inspired provisions of the reconciliation bill have been dropped for now in the new proposed House version. (ADISA strongly opposes the PRO Act.) However, the bill still includes civil penalties for those who commit unfair labor practices. If passed into law in its current form, the bill would impose civil penalties of up to $50,000 per violation of the National Labor Relations Act; double civil penalties up to $100,000 for NLRA violations that resulted in discharge or serious economic harm where the employer committed another similar violation within the past five years; and assess civil penalties against directors and officers where the facts indicate that personal liability is warranted. The narrowed labor provisions in the revised bill would have a greater likelihood of withstanding a Senate Byrd Rule challenge, the Review reports.
Regulation
NASAA Study: Reg BI Fails to Curb Conflicts: Despite having operated under a new standard of conduct for more than a year, most brokerages continue to demonstrate conflicts of interest when making investment recommendations to retail customers, according to a North American Securities Administrators Association study, InvestmentNews reports. The report, released yesterday, stated that “for Reg BI to be successful and live up to its 'best interest' label, securities regulators will need to see to it that firms do a much better job of providing fair and balanced point-of-sale disclosure regarding fees, costs, and risks, particularly where a firm is recommending the most expensive and riskiest products in the retail market. Complex, costly, and risky products must be more carefully managed.” According to InvestmentNews, SIFMA President Ken Bentsen said that the “report misses the mark in terms of the numerous and substantial changes that firms have made to enhance investor protection and satisfy the best interests of their retail investors.”
The study is the second phase of NASAA’s review of Reg BI. Phase One, published in 2020, looked at the industry’s practices before Reg BI was implemented. There were 225 broker-dealers that were assessed in both the first and second phases, and the latest report focuses on the progress made by those firms, which serve more than 77.5 million retail accounts.
A coalition of several industry associations, including ADISA, are examining the study, and will continue to engage on this issue. Stay tuned for more information.
SEC Eases Path for Shareholder ESG Proposals: The Wall Street Journal reports that the U.S. Securities and Exchange Commission (SEC) reversed a Trump-era policy and acted Wednesday to streamline the process for shareholders to propose resolutions on environmental or social issues during the coming proxy season. The SEC rescinded guidance that since 2017 helped company managers to exclude some shareholder proposals from their annual proxy statements. The change reflects the agency’s emphasis on so-called shareholder democracy under Chairman Gary Gensler. Under the new policy, SEC staff will be more receptive to shareholder proposals regarding issues that have “a broad societal impact” and will focus less on an issue’s relevance to a particular company.
SEC Goes After Orphan Accounts: RIABiz reports that the $8-trillion RIA business should be on high alert after federal regulators discovered a time bomb that may be ticking in the compliance basement of firms across the industry. The SEC penalized Regal Investment Advisors, a $1.9-billion Michigan RIA, nearly $1 million for an offense its examiners either overlooked or failed to take into account. The federal regulator fined Regal, in part, for its handling of clients orphaned when an advisor leaves an RIA. Those accounts -- unbeknown to the investors -- lost full service but Regal continued to levy full fees. “The issue is now clearly on the SEC’s radar and ripe for an enforcement sweep,” says Ari Sonneberg, partner and chief marketing officer for the Wagner Law Group in Boston.
