Any question about how Scott Bessent, Donald Trump's Treasury Secretary nominee feels about applying import tariffs and extending the Tax Cuts and Jobs Act were laid to rest during his confirmation hearing before the Senate Finance Committee.
"As we begin 2025 Americans are barreling towards an economic crisis at year end," said Bessent. "If Congress fails to act, Americans will face the largest tax increase in history, a crushing four-trillion-dollar tax hike."
"We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers, service workers and seniors."
The discussions came during Bessent's hearing on Thursday.
Extending the TCJA, which is set to expire at the end of the year, is a lightning rod in the muni community as its provisions included eliminating advance refunding on tax exempt bonds and capping the state and local tax deduction at $10,000.
Despite the unpopular provisions many muni market leaders are optimistic about Bessent's influence over regulatory policy.
"The U.S. economy and small businesses are also grappling with the consequences of one of the most heavy-handed periods of regulation in our nation's history," ASA President and CEO Chris Iacovella said in a letter.
In the letter addressed to the presumptive Secretary, the ASA lays out the industry's deepest worry.
"As Congress begins the process of developing tax reform legislation this year, the ASA is concerned that eliminating the longstanding municipal tax exemption continues to be considered as a potential revenue raising mechanism."
"We believe this is an entirely misguided idea that will unnecessarily disrupt a well-functioning market and cripple the balance sheets of many state and local economies."
The banking industry and the National Association of Bond Lawyers also views Bessent as a good candidate of the job.
Republicans and Democrats remain deeply divided over the future of the TCJA although both parties agree the tax breaks for those making under $400,000 a year should be left in place.
"That it will be a four plus trillion-dollar tax increase if we do not extend this law," said Committee Chairman Mike Crapo. "If that four plus trillion-dollar tax increase happens, it's not just going to be something that impacts the wealthy. $2.6 trillion of it, falls on people who make under $400,000 per year."
Crapo threw his support behind the nominee saying, "Our most recent election, American voters resoundingly support returning to the robust economy that we enjoyed during President Trump's first term. If you're confirmed, I look forward to working closely with you to achieve these and other essential aims."
The effectiveness of imposing tariffs on imported goods to boost revenues has also emerged as point of departure for the incoming administration and the Democrats on the committee.
"I believe these tariffs, you can call it whatever you want, in terms of trying to gussy it up, they're going to be paid for by our workers and small businesses," said Sen. Ron Wyden, the minority ranking member representing Oregon.
"All through the campaign, we heard they weren't the foreign countries were going to pay it. I think that's baloney. It's going to be paid for by workers and small businesses."
Bessent believes the controversy of imposing tariffs is not based on fact.
"The history of tariffs and tariff theory does not support what you're saying," said Bessent. "Traditionally, we see that if we were to say, use a number that has been thrown around in the press of 10% then, traditionally, the currency appreciates by 4% so the 10% is not passed through."
"Foreign manufacturers, especially China, which is trying to export their way out of their current economic delays, they will continue cutting prices to maintain market share."
Bessent's background includes founding the Key Square Group hedge fund and serving as an advisor to liberal financier George Soros.
While working for Soros, Bessent made headlines and billions by betting against the British pound and the Japanese yen. Assuming he's confirmed, Bessent would be the country's first openly gay Treasury secretary.
Bessent champions a three-arrow economic approach that includes cutting the federal deficit to 3% of gross national product, spurring growth to 3% through deregulation, and increasing domestic oil production by 3 million barrels per day.
If Bessent is approved by the committee, the decision will go to the full Senate for unlimited debate followed by majority vote on whether to confirm, reject, or take no action on the nomination.
