With less than 80 days until election day, the outcome of the 2024 election cycle remains murky.

At the federal level, Breckinridge anticipates close races for Congress and the presidency. Subjectively, we think there is an equal chance of a Republican sweep¹, a split decision, or a Democratic sweep. Legislative margins in the House and Senate are likely to be modest regardless of which outcome prevails.

Municipal investors should therefore prepare for a range of post-election policy environments. Key themes to consider include rising federal deficits and further increases to defense spending, expiring tax provisions and attendant risks to the tax exemption, potential changes to Medicaid and Affordable Care Act (ACA) subsidies, and possible changes to infrastructure spending. Tariff and immigration policy changes are also worth monitoring.

• A Republican sweep presents the most potential change – and risk – for investors. We see potential for reform of the exemption, particularly as it relates to higher education credits, a slightly weaker credit environment, and less tax-exempt bond supply. Volatility might be modestly higher in this scenario, as well, creating buying opportunities for investors, from time-to-time, next year.
• Split control creates an increased likelihood of a reversion to higher pre-2018 individual income tax rates and the possible restoration of the state and local tax deduction (SALT).
• A Democratic sweep creates potential for higher corporate and individual tax rates, modestly better credit fundamentals, and full SALT restoration.
• Across all scenarios, the bias is for modestly lower Municipal/Treasury (M/T) ratios (though, admittedly, tax changes have a mixed history of pushing ratios one way or the other) and some degree of sustained upward pressure on inflation via large ongoing deficits, a floor on tariffs, and lower immigration.

At the state level, the 2024 election cycle presents few material gubernatorial or mayoral races. Ballot initiatives in California could result in modestly more supply, and property tax initiatives in Colorado and North Dakota highlight reduced taxpayer willingness to support levies.

A Brief Rationale for Three Potential Federal Election Outcomes

1. Republican Sweep

As of late-August, a Republican sweep seemed possible.

At the presidential level, former President Trump has a strong chance to win. He polls within the margin of error in most national polls against Vice President Harris. Trump and Harris are essentially tied in most of the seven swing states (AZ, GA, MI, NC, PA, and WI).² Betting markets suggests a close race, and Trump’s lead may be understated if the polling error that characterized the 2016 and 2020 elections persists in 2024.³

Republicans are also well positioned to win the Senate. Only 11 Republican senators up for re-election compared to 23 Democrats. Seven of these seats are competitive, and Republicans need to win only one to retake the chamber (AZ, MI, MT, NV, OH, PA, and WI).⁴

In the House, Republicans have an advantage on the issues of immigration and inflation. These matters are top-of-mind for U.S. voters, and Republicans are preferred on both.⁵ As Figure 1 illustrates, real wage growth was stronger during the pre-COVID Trump years.

2. Split Control

A split decision is also possible. 

For example, a Trump win alongside a Democratic House seems plausible, as polling indicates there may be more ticket-splitting than in recent election cycles. Incumbent Senate Democrats are polling better than Vice President Harris in the seven competitive Senate races (Figure 2). Democratic candidates are currently favored in the generic ballot, and fundraising numbers indicate strong support for down-ballot Democrats.⁶

A Harris victory alongside a Republican Senate is also possible. The Vice President retains a persistent polling advantage in national presidential polls, but Republicans’ advantage in Senate races may prove insurmountable.⁷

3. Democratic Sweep

Harris’ small but persistent lead could grow in the weeks following the Democratic National Convention.⁸ The Senate and House generic ballot numbers discussed above may signify a latent wave of support for Democratic candidates that was missing when President Biden was the Democrats’ candidate. The economy is slowing, but it may not matter to the election result. Registered voters’ views of the economy have recently improved, and a potential Federal Reserve (Fed) rate cut in September could forestall any meaningful downtick that would have electoral implications.⁹

Regardless of Outcome, No Clear Majority

Under all three scenarios, we expect that legislative margins will remain close. Senate races are likely to result in a small majority for whichever party takes control of the chamber. Likewise, House districts are highly gerrymandered. Only 22 races are “toss-ups” per the Cook Political Report.¹⁰ This suggests that the fiscal policies most likely to impact the muni market will be enacted via budget reconciliation (which avoids the 60-vote filibuster requirement in the Senate). It also suggests that away from fiscal policy, executive branch regulatory policy will continue to play an important domestic policymaking role (e.g., regarding immigration and trade choices). Advancing legislation through Congress could prove difficult.

Key Issues to Monitor

The mixed election picture suggests investors should prepare for multiple policymaking possibilities come January 2025. Below we outline several salient issues for municipal investors. In the following section, we highlight how a different mix of lawmakers might address each and the investment implications.

Large Federal Deficits

The federal government’s weak fiscal condition is likely to circumscribe policy choices, to some degree, in the next Congress.

The Congressional Budget Office (CBO) now estimates the U.S. debt/gross domestic product (GDP) ratio will reach 122 percent in 2032. Annual deficits are projected to be 6 percent of GDP for the next ten years (Figure 3).

CBO’s estimates are based on current law and relatively benign economic assumptions. Among other things, they assume an aggregate borrowing cost to the Treasury of 3.5 percent over ten years and full employment.¹¹

They also assume no changes to the trajectory for defense spending. This runs counter to the recent conclusions of a bipartisan commission that called for real increases of between 3 percent and 5 percent, annually (Figure 4).¹² Such changes could add as much as $2 trillion to deficits over the ten-year window.

Substantial and rising federal deficits create the potential for Treasury curve steepening and a higher term premium, driving up federal borrowing costs. This, in turn, could lead to weaker economic growth and federal fiscal austerity, as lawmakers are forced to scrutinize spending or raise revenue to soothe bond markets.

Expiring Tax Provisions

CBO’s figures also assume that key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expire on December 31, 2025. Expiry of these provisions results in $4 trillion in tax increases relative to current law and would impact municipal investors in several ways. Recall that the TCJA:

(a) reduced corporate income tax rates, which lowered demand from corporate buyers, in particular banks;

(b) lowered the Alternative Minimum Tax (AMT) phaseout threshold, which marginally increased demand for AMT bonds;

(c) capped the state and local tax deduction at $10,000 per return, which increased the value of buying in-state bonds for high income investors in high income-tax states;

(d) lowered top federal personal income tax rates, which marginally reduced the after-tax advantage to owning municipals, in most states; and

(e) eliminated the ability of issuers to advance refund municipal bonds on a tax-exempt basis, which has contributed to lower supply over the past several years. 

Figure 5 highlights material muni-related provisions of the TCJA and identifies which ones are scheduled to expire on December 31, 2025.

Risks to the Tax Exemption

The combination of burgeoning deficits and scheduled rises in tax rates heightens the risk that Congress alters the municipal interest exemption in 2025.  

Since the Great Financial Crisis, as the federal government’s fiscal condition has weakened, lawmakers have proposed curtailing the tax exemption with some regularity. President Obama (D) proposed capping the value of the exemption at the equivalent of a 28 percent marginal tax rate at least three times.¹³ Former House Ways & Means Chairman Dave Camp (R) recommended taxing municipal interest a 10 percent rate.¹⁴ An initial version of the TCJA would have eliminated private activity bond financing (which represented roughly 20 percent of the tax-free bond market).¹⁵ Given that debt levels and deficits are more acute today than in the 2010s, it seems likely that lawmakers at least consider the idea, again, next year.

Savings from the exemption could partially finance the extension of sunsetting TCJA provisions. Figure 6 lists the largest federal tax expenditures. The tax exemption for municipal interest ranks 18. Eliminating it saves $372 billion over ten years.

Congress is highly unlikely to nix the exemption in full. Powerful constituencies have successfully forestalled multiple efforts to tax municipal bond interest since the inception of the modern, broad-based income tax in the 1940s. And the market famously froze-up in 1986 when Senator Bob Packwood, then-Chairman of the Senate Finance Committee, proposed subjecting all municipal interest payments to the alternative minimum tax.¹⁶

However, curtailing the exemption prospectively, for a subset of bonds, is a risk for investors. The savings from partially limiting the tax exemption would be modest, but Congress may not care if lawmakers have hard deadlines to meet (like December 31, 2025) and seek a way to finance the extension of popular fiscal provisions. In 2017, the Joint Committee on Taxation estimated that prohibiting tax exempt advance refundings would save the Treasury only $17 billion over ten years.¹⁷ Congress eliminated them, anyway.

Medicaid and ACA Policy

Federal deficits may also compel changes to Medicaid and ACA policy.

Adjustments to Medicaid could negatively impact hospitals, state, and local credit quality. Federal Medicaid funding comprises 17 percent of total state and local government revenue (Figure 7).¹⁸ Medicaid grants reduce hospitals’ bad debt expenses, and the program’s “matching grant” design lowers the marginal cost of state subsidies for healthcare needs.¹⁹ Medicaid funding also buoys regional economic resilience during downturns, especially in areas where the largest employer is a hospital.²⁰

Changes to ACA subsidies could have similar impacts, especially for hospitals. ACA subsidies tend to reduce bad debt expenses for hospitals. They were made temporarily more generous during the pandemic, but the enhanced subsidy is scheduled to sunset by the end of 2025. Hospital margins and ratings could drift lower if the sunset occurs.²¹

Infrastructure Policy

Deficits could also implicate infrastructure policy. Congress may seek to reduce or expand mass transit funding.²² There could be another push to sell or privatize certain public assets.²³ Clean energy subsidies proffered in the Inflation Reduction Act (IRA) might also be at risk, which could slow growth in areas benefitting from the manufacturing boom associated with that law (Figure 8). 

Tariffs

Away from fiscal policy, the next president is likely to adjust tariffs, which could pressure inflation, slow growth, or harm export industries via retaliation. The country’s current tariff posture is promulgated under four federal laws.²⁴ These provisions have been utilized by both Presidents Trump and Biden to protect national security, promote trade reciprocity, and protect nascent industries. To date, higher tariffs on certain goods have had only a limited impact on prices and local economies, but they have imposed upwards of $300, annually, in taxes on U.S. households.²⁵ Substantial increases in tariffs, or changes to them, could prove important to monitor.

Immigration

Likewise, the pace of immigration is likely to slow in the next administration. Both presidential candidates now favor reduced immigration.²⁶ As we outlined in the 2024 Municipal Market Outlook, lower immigration would likely reduce social services costs associated with the migration crisis, but over the long-term, such a policy might also be inflationary and slow real economic growth. Regions with declining working-age populations would likely be the most vulnerable. A policy geared toward removing immigrants could exacerbate these concerns. Metro areas with high concentrations of new immigrants could have outsized exposure in such a scenario (Figure 9).

Investment Implications

The table below and following summaries outline the direction for policymaking under the scenarios outlined above.

Republican Sweep

A Republican sweep presents the most potential risk for municipal investors. Republicans seek to extend the TCJA’s tax cut provisions to the extent possible.²⁷ In legislation and various proposals, leaders have proposed curtailing the municipal tax exemption, eliminating the SALT, and reducing Medicaid spending.²⁸ In his first term, President Trump sought more private sector involvement in infrastructure finance, and Republicans routinely supported less federal aid for mass transit. The party broadly desires to reduce or end clean energy subsidies in the IRA. In terms of tariffs, Trump has proposed an across-the-board 10 percent levy on all imports as well as a 60 percent rate for goods imported from China.²⁹ Republicans generally support lower immigration as well as stronger internal enforcement of immigration law. 

The Republican party is unlikely to achieve most of this wish list, even if it sweeps November’s elections. Its blue-collar voter base is squeamish about some of these prescriptions. For perspective, the House Ways and Means Chairman, Jason Smith, has prioritized middle class tax cuts over those for high income taxpayers.³⁰ Some Republicans are open to raising the corporate income tax rate.³¹ A majority of Republicans view Medicaid “very” or “somewhat” favorably.³² The potential job losses from rolling back IRA subsidies would disproportionately impact Republican House districts (Figure 11). A substantial rise in tariffs might disproportionately impact lower-income voters for whom goods spending consumes a larger portion of household income.³³ State-level consumption patterns bear this out and suggest that trade duties may prove most burdensome in jurisdictions that support Republican politicians (Figure 12).

Still, the tendency in a Republican sweep is for reduced federal aid, risks to the exemption, a slower pace of immigration, and less free trade. M/T ratios would be biased lower if the tax exemption were curtailed. Weaker credit quality might follow from a more austere federal posture. The overall uncertainty could create periodic buying opportunities, especially if Congress periodically proposes – and then backs off – legislation to adjust the municipal bond tax exemption. M/T ratios could move up and down throughout the year.

Lastly, we note a particular risk regarding to the exemption for private higher education issuers in a Republican sweep. In January, Republican lawmakers questioned whether some colleges had forfeited their tax-exempt 501(c)(3) status by failing to fulfill their educational purposes in their responses to the Israel-Hamas war. More recently, lawmakers have proposed conditioning grant aid to higher education providers based on their cessation of diversity, equity, and inclusion programs.³⁴ They have also proposed limiting the tax exemption to states that permit K-12 school choice programs.³⁵ In the TCJA, Republican lawmakers led the effort to impose a modest tax on large private college endowments and enacted an income surtax on the highest-paid private college executives.³⁶ Unlike some other constituencies (like hospitals), the private higher education lobby has a smaller presence on Capitol Hill. Taken together, the risks for private higher education issuers in a Republican sweep seem material.

Split Control

Divided government is likely to result in less change – and risk – for bondholders. In this scenario, the inertia associated with split control augurs for a less expansionary fiscal policy and a reversion to higher marginal income tax rates for high earners. Full restoration of the SALT deduction also becomes possible.  

We anticipate that Democrats will hold out as long as needed to ensure that the TCJA’s tax cuts for high earners expire (or are replaced with higher rates).³⁷ Likewise, Republicans would likely require that enhanced ACA subsidies expire, as scheduled. Spending prerogatives for both parties, around Medicaid, mass transit, infrastructure, and other priorities, would likely stall.

Notably, a critical mass of lawmakers in both parties support eliminating the $10,000 cap on the SALT deduction.³⁸ This suggests that, in a split control scenario, an eventual tax deal might restore the full deduction.

The main investment takeaways in a split decision result are that M/T ratios might be biased lower on higher tax rates while fundamentals for bonds that benefit from federal support would largely remain unchanged. If the SALT deduction is eliminated, the benefit to “staying in state” for investors in high-tax states would be reduced. More out-of-state purchases in state-biased muni accounts could be warranted, depending on market conditions.

Democratic Sweep

Under full Democratic control, federal spending and tax rates are likely to rise. Proposals from Vice President Harris, the Democratic Party platform, and President Biden’s FY 2025 budget could materialize as law. These include raising the corporate income tax rate to 28 percent, allowing top income tax rates to revert to their pre-TCJA level, taxing capital gains and dividends at ordinary income rates, expanding the child tax credit, extending enhanced ACA subsidies, and supporting affordable housing, among other priorities.³⁹

In this scenario, M/T ratios should be biased lower on higher rates and fewer opportunities to generate tax-advantaged income, generally. Credit quality would likely be insulated from significant reductions in federal aid for Medicaid or otherwise. Congress would likely restore the SALT deduction in full.

There is also an outside chance that advance refundings are restored if Democrats win full control of federal offices. That could increase supply and result in upward pressure on M/T ratios. However, we believe this is currently unlikely given other party priorities.

Commonalities Across Scenarios

One takeaway from all three scenarios is that the bias for M/T ratios is likely to be lower, not higher.

Tax changes do not always translate into lower (or higher) ratios. For example, ratios moved to a higher range after 2008 on credit concerns, despite higher top marginal rates. Ratios fell alongside lower top rates after tax reform bills in 2001 and 2003. As we have outlined in previous work (See Market Technical Affect Municipal Bond Prices (Looking Beyond M/T Ratios and Relative Value)), seasonal conditions, headline risk, and other technical factors can influence ratios.

But all things being equal, higher tax rates and/or less access to tax-free income should tend to push M/T ratios lower. We note that M/T ratios declined post-1993 after Congress raised top federal income tax rates, and M/T ratios have declined since 2017, in no small part because Congress prohibited advance refundings, which has contributed to a smaller available pool of tax-free bonds (Figure 13).

All three scenarios also share the conditions for marginally higher inflation and slower growth. For example, tariffs could very well rise under either a Trump or Harris administration, but neither candidate is likely to cut tariff rates. Similarly, both candidates support reduced immigration relative to recent years. These policies should tend to increase input prices and wages while limiting the economy’s overall growth potential.

State Races and Ballot Initiatives

Unlike in previous cycles, there are few gubernatorial or big-city mayoral races with implications for municipal investors. Only 11 governorships are on the ballot in 2024. Races in New Hampshire and North Carolina could be reasonably close, but neither is expected to have meaningful impact on policies that would affect municipal investors.⁴⁰

On the other hand, several ballot initiatives bear monitoring.

In California, voters will be asked to approve $20 billion in general obligation bonds (equal to 3 percent of all muni debt in the state) to fund public school, water, and environmental protection projects.⁴¹ Voters will also be asked whether to lower the threshold to approve local bond issuances from the current 66.66 percent to 55 percent. The latter question could spur additional issuance, prospectively.⁴²

In Colorado and North Dakota, voters may choose to place limits on property tax increases. A potential initiative in Colorado would limit annual statewide property tax growth to 4 percent, absent voter approval.⁴³ The measure is silent regarding an exemption for property tax-backed bonds which has unnerved some municipal market observers (but will likely be resolved).⁴⁴ In North Dakota, an initiative to would prohibit property taxes on residential homes except to repay bonded indebtedness.⁴⁵

The Colorado and North Dakota referenda underscore that voter willingness to support ongoing property tax hikes is not unlimited. After four years of rapid home-price inflation that has far outpaced wage growth (Figure 14), investors should expect taxpayers to more closely scrutinize municipal budgets.

Conclusion

The 2024 election cycle provides limited clarity for municipal bond investors. We currently anticipate a roughly equal chance for a Republican sweep, a split decision, or a Democratic sweep. The lack of clear direction suggests that investors should prepare for a variety of scenarios. A Republican sweep presents the most risk to the market via reform of the tax exemption and the potential for a more austere federal spending posture. Split control presents the likelihood of higher top marginal rates and the possible elimination of the SALT cap. A Democratic sweep portends higher top personal and corporate income tax rates, coupled with more federal support for municipal issuers. Across scenarios, a downward bias for ratios and growth and an upward bias for inflation seems plausible. But at this point, there is likely too little information to make a big bet on duration or credit. A wait-and-see approach seems appropriate.

[1] The term “sweep” refers to winning the presidency and both chambers of Congress.

[2] See RealClearPolitics polling average, available at https://www.realclearpolling.com/latest-polls, and FiveThirtyEight polling averages, available at https://projects.fivethirtyeight.com/polls/president-general/2024/national/.

[3] See PredictIt, as of Wednesday, August 28, available at: https://www.realclearpolitics.com/. See also FiveThirtyEight.com, “Polling isn’t broken, but pollsters still face Trump-ear challenges,” Geoffrey Skelley, May 30, 2024. Available at https://abcnews.go.com/538/polling-broken-pollsters-face-trump-era-challenges/story?id=110677969.

[4] See Cook Political Report senate race ratings, available at https://www.cookpolitical.com/ratings/senate-race-ratings.

[5] Gallup poll re: “most important problem facing the country”, June 2024. Available at https://news.gallup.com/poll/1675/Most-Important-Problem.aspx.

[6] The FiveThirtyEight polling average favored Democrats by 1.2 percentage points as of August 22, 2024. Federal Election Commission data through June 30 show that many Democratic House candidates retain cash and fundraising advantages relative to their opponents. Mary Ellen McIntire, Daniela Altimari, and Herb Jackson, “FEC report show Democrats with tough races ahead building cash,” Roll Call, July 16, 2024.  

[7] At the time of this writing, Harris led Trump in national presidential polling averages by 3.3 percentage points (FiveThirtyEight) and 1.5 percentage points (RealClearPolitics), respectively.

[8] For example, the FiveThirtyEight average favored Harris in the week leading up to the Democratic National Convention by 1.8 percentage points.

[9] See Civiqs.com polls re: “National Economy: Current Condition” and “National Economy: Direction” as of mid-August. Available at https://civiqs.com/.

[10] See Cook Political Report’s House ratings summary, available at https://www.cookpolitical.com/ratings/house-race-ratings.

[11] Congressional Budget Office, Economic Estimates, June 2024.

[12] The bipartisan Commission on the National Defense Strategy recently recommended that Congress increase real defense spending by at least 3 percent to 5 percent, annually. See p. xi of the Commission on the National Defense Strategy, July 2024.

[13] “Obama proposes municipal bond tax exemption cap, again,” Reuters, April 2013. Available at https://www.reuters.com/article/markets/us/obama-proposes-municipal-bond-tax-exemption-cap-again-idUSL2N0CW2II/.

[14] Norton Francis, “Camp Tax Reform Would Create New Challenges for States,” March 3, 2014, Tax Policy Center. Available at: https://www.taxpolicycenter.org/taxvox/camp-tax-reform-would-create-new-challenges-states.

[15] Wade Norris, “House’s Private-Activity Bond Repeal Harms Housing Production,” Affordable Housing Finance, November 27, 2017. Available at: https://www.housingfinance.com/policy-legislation/houses-private-activity-bond-repeal-harms-housing-production_o#:~:text=The%20House's%20Tax%20Cuts%20and,eliminate%20PABs%20and%204%25%20LIHTCs.

[16] Kenneth Gilpin, “Credit Markets; Tax Plan Paralyzes Municipals,” March 20, 1986, New York Times. Available at https://www.nytimes.com/1986/03/20/business/credit-markets-tax-plan-paralyzes-municipals.html.

[17] Estimate from Joint Committee on Tax, summarized on page 4 of a November 2017 version of H.R. 1, the “Tax Cuts and Jobs Act”.

[18] Medicaid comprised between 12 and 41 percent of state non-capital spending per data from the National Association of State Budget Officers (NASBO). Breckinridge calculation based on each state’s expenditures, excluding bond and capital funds.

[19] Each dollar spent by a state unlocks additional funding based on the matching grant formula for that state.

[20] Georgetown University McCourt School of Public Policy, “Medicaid’s Role in Rural Areas Has Grown: Families Have Much at Stake in the Unwinding,” August 2023. Available at https://ccf.georgetown.edu/2023/08/17/medicaids-role-in-rural-areas-has-grown-families-have-much-at-stake-in-the-unwinding/

[21] Jaared Ortaliza, Anna Cord, Matt McGough, Justin Lo, and Cynthia Cox, “Inflation Reduction Act Health Insurance Subsidies: What is their impact and what would happen if they expire,” Kaiser Family Foundation, July 26, 2024. Available at https://www.kff.org/affordable-care-act/issue-brief/inflation-reduction-act-health-insurance-subsidies-what-is-their-impact-and-what-would-happen-if-they-expire/#:~:text=Temporary%20subsidies%20were%20originally%20passed,three%20years%2C%20ending%20after%202025.

[22] This is a perennial proposal from Republicans that continues to show up in “think tank” reports. For example, see pp. 634-636 in The Heritage Foundation’s “Mandate for Leadership” report.

[23] For example, an early Trump plan to leverage federal dollars to spur more infrastructure also included plans to sell federal assets like Reagan National Airport, the Tennessee Valley Authority, and the Bonneville Power Authority.

[24] Congressional Research Service, “Trump Administration Tariff Actions: Frequently Asked Questions,” December 15, 2020.

[25] Erica York, “Tariff Tracker: Tracking the Economic Impact of the Trump-Biden Tariffs,” Tax Foundation, June 26, 2024.

[26] The Republican party platform calls for a variety of policies to reduce immigration (see p. 8 of the 2024 party platform). See also: Chris Johnson, “Harris campaign starts to talk tough on border security,” Roll Call, August 14, 2024.

[27] See p. 9 of the Republican Party Platform and comments from Jason Smith (MO-8), House Ways and Means Chairman, available at: https://waysandmeans.house.gov/2024/06/27/chairman-smith-op-ed-all-options-must-be-on-the-table-to-deliver-tax-relief-for-working-people/.

[28] For example, the House Republican Study Committee has proposed eliminating the exemption (see p. 33 of the Republican Study Committee’s FY 25 budget). The Heritage Foundation’s Project 2025 policy document includes proposals to convert Medicaid to a block grant program or to a per capita grant structure. The authors also suggest giving more authority to states to implement the program in various ways and to crack down on Medicaid fraud (see pp. 462-469 of The Heritage Foundation’s “Mandate for Leadership” document). The Republican Study Committee, composed of a group of Republican lawmakers, has offered similar ideas (see pp. 94-96 of the Republican Study Committee’s FY 2025 budget proposal).

[29] Alan Wolff, “Trump’s proposed blanket tariffs would risk a global trade war,” Peterson Institute for International Economics, May 29, 2024.

[30] https://waysandmeans.house.gov/2024/06/27/chairman-smith-op-ed-all-options-must-be-on-the-table-to-deliver-tax-relief-for-working-people/

[31] Joseph Zeballos-Roig, “House Republican support grows for corporate tax increase, threatening key part of Trump’s economic legacy,” Semafor.com, July 3, 2024. Available at: https://www.semafor.com/article/07/02/2024/house-republican-support-grows-for-corporate-tax-increase-threatening-key-part-of-trumps-economic-legacy.

[32] Kaiser Family Foundation, “5 Charts about Public Opinion on Medicaid,” March 30, 2023. https://www.kff.org/medicaid/poll-finding/5-charts-about-public-opinion-on-medicaid/

[33] Kimberly Klausing and Mary Lovely, “Why Trump’s tariff proposals would harm working Americans,” Peterson Institute for International Economics, May 2024. Available at https://www.piie.com/publications/policy-briefs/2024/why-trumps-tariff-proposals-would-harm-working-americans.

[34] For example, Rep. Greg Murphy (R – NC) introduced HR 7725 in April 2024. The bill would cut federal funds to medical schools that provide diversity, equity and inclusion (DEI) programs. Additionally, for perspective, the Chronicle of Higher Education publishes a “DEI Legislation Tracker” that documents state and federal legislation designed to limit or end certain DEI-related policies. The Chronicle has identified 85 bills in states and Congress since 2023. Available here https://www.chronicle.com/article/here-are-the-states-where-lawmakers-are-seeking-to-ban-colleges-dei-efforts.

[35] See: S. 3520 – ACE Act. Available at: https://www.congress.gov/bill/118th-congress/senate-bill/3520.

[36] The TCJA includes several provisions that target private higher education issuers from a tax perspective, including a surtax on endowment income for several of the elite colleges in the U.S. and a tax on executive compensation in excess of $1 million. See https://www.klgates.com/Just-Passed-Tax-Cuts-and-Jobs-Act-Will-Significantly-Impact-Higher-Education-12-20-2017.

[37] For example, the party platform includes a proposal to ensure that no American household earning less than $400,000 per year pays more in income taxes. See p. 14 of Democratic Party Platform, 2024)

[38] There are 33 members of the bipartisan “SALT Caucus” https://gottheimer.house.gov/posts/release-gottheimer-kim-garbarino-eshoo-re-launch-bipartisan-salt-caucus-to-fight-for-tax-relief-for-middle-class-families-2.

[39] Committee for a Responsible Federal Budget, “The Kamal Harris Agenda to Lower Costs for American Families,” August 16, 2024. Available at https://www.crfb.org/blogs/kamala-harris-agenda-lower-costs-american-families. See also, Treasury “Green Book” for FY 2025.

[40] In New Hampshire, the gubernatorial primaries will be held on September 10, 2024. In North Carolina, Attorney General Josh Stein is running against Lieutenant Governor Mark Robinson.

[41] Propositions 2 and 4. Per Bloomberg, California issuers, including the state, had $633 billion in debt outstanding as of July 1, 2024.

[42] Proposition 5.

[43] Karen Pierog, “Colorado special legislative session set on more property tax relief,” Bond Buyer, August 16, 2024.

[44] Ibid.

[45] North Dakota Initiated Measure 4.

BCAI-08282024-skkbxg4l (8/28/2024)

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Breckinridge’s ESG analysis is based on third party data and Breckinridge analysts’ internal analysis. Analysts will review a variety of sources such as corporate sustainability reports, data subscriptions, and research reports to obtain available metrics for internally developed ESG frameworks. Qualitative ESG information is obtained from corporate sustainability reports, engagement discussion with corporate management teams, among others. A high sustainability rating does not mean it will be included in a portfolio, nor does it mean that a bond will provide profits or avoid losses.

Any specific securities mentioned are for illustrative and example only. They do not necessarily represent actual investments in any client portfolio.

The effectiveness of any tax management strategy is largely dependent on each client’s entire tax and investment profile, including investments made outside of Breckinridge’s advisory services. As such, there is a risk that the strategy used to reduce the tax liability of the client is not the most effective for every client. Breckinridge is not a tax advisor and does not provide personal tax advice. Investors should consult with their tax professionals regarding tax strategies and associated consequences.

Federal and local tax laws can change at any time. These changes can impact tax consequences for investors, who should consult with a tax professional before making any decisions.

Some information has been taken directly from unaffiliated third-party sources. Breckinridge believes the data provided by unaffiliated third parties to be reliable but investors should conduct their own independent verification prior to use. Some economic and market conditions contained herein have been obtained from published sources and/or prepared by third parties, and in certain cases have not been updated through the date hereof. All information contained herein is subject to revision. Any third-party websites included in the content has been provided for reference only.