Senate Finance could flip leaders
Current polls show that controlling the Senate is a fluid situation marked by tight projections within margins of error, and the outcome could have very strong implications for the municipal market based on who holds the committee gavels.
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The Senate Finance Committee’s sphere of oversight includes federal tax policy, debt levels, tariffs, and surface transportation reauthorization which is of keen interest to the municipal bond market.
“A surface transportation reauthorization bill appears unlikely in the lame duck given the limited calendar dates post-election and the lack of a Senate package,” said R. Neal Martin, senior director of government relations for ML Strategies.
“The most likely outcome is a clean extension into 2027 to allow time for continued work regardless of which party wins control of the Senate in the midterm elections.”
Major transportation infrastructure projects are often financed by a combination of bonds, formula funding, and federal grants that require congressional action.
Sen. Mike Crapo, R-Idaho has been the chairman of the committee since 2025 and was a supporter of the 2017 Tax Cuts and Jobs Act that was passed during President Trump’s first administration.
If the Republicans maintain control of the Senate, he’s expected to retain the chairmanship.
Crapo touts his support for free trade and keeps a running total of the national debt on his home page.
“In a lame duck presidency, I wouldn’t be surprised to see more push back on the Trump trade agenda,” said Brett Bolton, the managing director of federal legislative affairs of the Bond Market Association.
“His (Crapo’s) agenda would probably focus on continued tax policy implementation, international trade, healthcare policies within the committee’s jurisdiction, and continued bipartisan work on IRS modernization and tax administration – an issue he has worked on with Ranking Member Wyden,” said Martin.
Crapo also has a reputation for supporting raising the cap on bank qualified debt.
Under current rules, which have been in place since the late 1980’s, bond issuers selling $10 million or less in tax-exempt bonds per calendar year can designate them as “bank-qualified,” allowing financial institutions to deduct 80% of the carrying costs of holding the debt.
Muni advocates support raising the cap and indexing it to the inflation rate.
“Crapo has been a sponsor of bank qualified debt that raises the cap from $10 to $30 million,” said Emily Brock, director of the Government Finance Officers Association’s federal liaison center.
If the Democrats prevail, Sen. Ron Wyden, D-Ore., is expected to handle the gavel in the 120th Congress.
Wyden is currently the ranking member on the committee and frequently uses his perch to attack the Trump administration.
“Expect a focus on oversight and affordability,” said Bolton. “I think it’s fair to say a Wyden-led committee will take every opportunity to push back on the Trump trade agenda, and the stubborn inflation caused by it.”
Wyden also has a legacy of supporting new forms of credit.
“Ron Wyden was the champion of Build America Bonds during the Obama administration,” said Brock. “He is a big fan of direct pay subsidy bonds. He points regularly to how successful they were when they were issued.”
Build America Bonds, known as “BABS” in muni world, were a wildly popular, taxable debt instrument that was tapped to pull the economy out of the World Financial Crisis.
Things went awry in 2013 as budget sequestration cuts reduced subsidy payment to issuers which effected state and local government budgets.
Bond issuers have been gun shy of direct pay subsidy bonds ever since.
Brock believes a Democratically controlled Senate could help launch a new round of direct pay subsidy bonds that would be immune to sequestration along with another muni wish list item.
“Our advance refunding initiative is a no-brainer, said Brock, especially with the price tag that comes along with it right now.”
Brock is looking to form a new House Municipal Finance Caucus and fight off threats to ending the tax exemption for bonds that build sporting arenas. Expanding private activity bonds also remains a focus.
Regardless of who gets control of Congress, any bipartisan legislation will need to pass muster at a White House where policy goals remain unclear.
“As long as you have President Trump in the White House, I don’t really see a tax package sailing through, even if it is a Democratic House and Senate,” said Brock.
