Senate “Rescues” PABs?

Unsurprisingly, the Senate’s tax bill does not include the repeal of PABs. Since the Senate version of tax reform is the tougher one to pass, and they’ve chosen some big fights as revenue raisers already (SALT etc.), my guess is that when the smoke clears PABs will simply remain in their current form, in terms of both eligibility and volume. Hard to see any other outcome on such a minor issue in the context of the overall battle.

But I don’t think the opposite approach to PABs in the House and Senate bills is necessarily meaningless political noise. The stark difference might indicate something about how infrastructure legislation might develop during 2018.

The House’s blunt repeal could be seen as primarily an ideological statement. This view would explain the distinctly un-nuanced language in the Tax Cuts and Jobs Act (“The Federal government should not subsidize the borrowing costs of private businesses”) despite the number of Republican members of the Committee sponsoring bills that actually expand PABs for new infrastructure sectors.

As such, the real TCJA message is: “Small-scale and more or less established usage of PABs for hospitals and low-income housing is OK. But don’t think that PABs will the path whereby private-equity high-rollers can establish large-scale ownership of public infrastructure. P3s or privatization deals might be beneficial is specific cases, but we’re not going to subsidize (or, more importantly, provide a federal endorsement for) highly-sophisticated, profit-oriented investors.”

With this warning shot clearly established in the TCJA, and with the usual suspects rising to defend PABs so the message is not missed, the Senate could turn to “rescuing” PABs by simply ignoring it. And with that, the Republicans move on to the real serious and immediate fights on tax reform. I wouldn’t be surprised if something like this was the plan the pre-arranged plan between the House and Senate from the start.

In effect, PAB repeal in the TCJA was probably meant to be a placeholder (and perhaps a tactic to smoke out private-equity supporter?) for a specific fight about infrastructure legislation in 2018.