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October 4, 2023

What to expect in Washington (October 4)

The House voted 216-210 to oust Speaker Kevin McCarthy (R-CA) from the leadership post October 3, a move driven by a small group of conservatives that brought the tensions that surrounded his ascension to the position in January full circle after he cut two deals with Democrats — essentially out of necessity — to address the debt limit and patch government funding through November 17. The development transcends policy disputes and the budget battles foreshadowed since Republicans won control of the chamber in the last election, and it is widely recognized to leave the chamber in a holding pattern at least until another Speaker is elected (the House is now out until next Tuesday). Rep. Patrick McHenry (R-NC), who is Financial Services Committee Chairman, was named as acting speaker, and Rep. McCarthy reportedly has no plans to try to regain the gavel.

The motion to vacate was initiated by Rep. Matt Gaetz (R-FL), who was joined by Reps. Andy Biggs (R-AZ), Ken Buck (R-CO), Tim Burchett (R-TN), Eli Crane (R-AZ), Bob Good (R-VA), Nancy Mace (R-SC), and Matt Rosendale (R-MT), eight members total. Democrats voted for the motion and news reports said Rep. McCarthy's comments on Sunday political shows regarding the continuing resolution through November 17, that "Democrats tried to do everything they can not to let it pass," cemented their decision not to help him stay in the post. McCarthy said then, and since, that Gaetz's actions were personal, evidenced by his and other conservatives' votes against a right-leaning CR on September 29 that proposed border provisions and spending cuts. The failure of that bill brought about the next move in the playbook, the clean CR.

There is currently no heir apparent for the speakership, though attention has naturally turned to Majority Leader Steve Scalise (R-LA), Whip Tom Emmer (R-MN), Republican Conference Chair Elise Stefanik (R-NY), Rules Committee Chairman Tom Cole (R-OK), and Freedom Caucus founder and Judiciary Committee Chairman Jim Jordan (R-OH). Scalise has reportedly been making calls seeking support. Rep. Gaetz's list of those who he would support for the position reportedly includes Republican Study Committee Chairman Kevin Hern (R-OK) and Budget Committee Chairman Jodey Arrington (R-TX).

The House had been slated to be in this week to consider full-year appropriations bills, including Energy and Water Development and Legislative Branch. Waiting until next week to vote on a new Speaker is facing some pushback. The Senate is also cutting short its workweek given services for the late Senator Dianne Feinstein (D-CA), who will lie in state at San Francisco City Hall today before a Thursday funeral. Laphonza Butler, appointed to fill the open California seat, was sworn in by Vice President Harris on Tuesday.

There's no telling what the House developments mean for meeting the next deadline for government funding or for long-term policy decisions on taxes and other issues. The next Speaker will have to contend with the regular order appropriations process and reconciling differences with the Senate, plus the border and Ukraine issues that fell by the wayside in last week's action to avoid a government shutdown.

Ways and Means Committee Chairman Jason Smith (R-MO) issued a statement saying, "House Democrats, in collusion with eight Republicans, pushed to oust a Republican Speaker of the House who won a conference election to be the Republican nominee for speaker and has overwhelming support among his Republican colleagues and a record of delivering for the American people." He said the development would be a setback for efforts to cut spending and "deliver for working class Americans."

In the near term, the Ways and Means Committee postponed a markup today of the Federal Disaster Tax Relief Act (H.R. 5863), introduced by Rep. Greg Steube (R-FL). The bill would provide personal casualty loss relief for any disaster area declared since 2020, provide an exclusion from gross income for amounts received as qualified wildfire relief payments, and treat East Palestine train derailment payments as qualified disaster relief payments. The Committee was also slated to consider bills on Customs and Border Protection revenue functions, protecting personally identifiable information in the context of tariffs, and extending reemployment services and eligibility assessments to all claimants for unemployment benefits.

Tax — In an October 2 letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), Bernie Sanders (I-VT), and Sheldon Whitehouse (D-RI) encouraged Treasury to take actions to improve tax fairness using its existing statutory authority, including regulations and other guidance to:

  • address abuses for ultra-wealthy families and dynastic wealth, including to police valuation games, perpetual dynasty trusts, and transfers of foreign assets;
  • ensure that large multinationals pay their fair share on the subsidiaries' passive earnings; and
  • ensure that fund managers and other business owners pay their fair share of payroll taxes.

"Administrative action is critical for implementation of new tax laws, but it should also be used to improve the implementation of previously passed legislation and eliminate loopholes … " the letter said. "The Treasury Department has clear authority to revisit prior rulemaking to ensure the law is correctly implemented and the wealthy do not receive further unmerited tax giveaways." It requested a staff briefing "on the Treasury's authority to act to make the tax system fairer and its rulemaking agenda for doing so by November 2, 2023."

With Congress out for the latter part of the week and a federal holiday on Monday, October 9, What to Expect won't be published again until Wednesday, October 11. WCEY Alerts will be issued as events warrant.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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