On April 10, the House approved the Senate-passed budget resolution, unlocking the legislative process known as reconciliation, which allows the Senate to pass tax and spending legislation with 51 votes rather than 60 votes. The budget resolution provides a framework for increasing funding for immigration enforcement, border security, and defense; cutting spending; and increasing the debt limit. Now congressional committees are drafting legislative text to make good on the budget goals set forth in the budget resolution framework. The Republican majority in both chambers, while slim, is driving this process.
While the House and Senate passed the same budget resolution, it contains separate instructions for each chamber on parts of the budget framework, including:
Crowe observation
Different instructions could be a sign that building consensus on the substantive provisions of the reconciliation bill might be difficult to achieve.
The budget resolution also includes a general instruction to use a current policy baseline to determine the cost of tax provisions. A current policy baseline, which has not been used in a reconciliation bill before, would treat the cost of extending expiring Tax Cuts and Jobs Act of 2017 (TCJA) provisions as zero, even though the Congressional Budget Office estimated in 2024 that extending all TCJA expiring provisions would add $4.6 trillion to the deficit. Given these factors, use of a current policy baseline could be an area of disagreement among Republicans.
Crowe observation
The effects of Department of Government Efficiency cuts and President Donald Trump’s tariff policy on the reconciliation bill are still unclear.
Congress and the White House largely have agreed that expiring provisions of the TCJA should be extended, but that is where certainty about the tax provisions ends. Significant questions remain regarding whether all expiring provisions should be extended, the period of extension, and what other tax cuts and offsets should be included in the reconciliation package.
The $10,000 cap on the state and local tax deduction (SALT cap), which was enacted as part of the TCJA and is scheduled to expire after 2025, is a good example of the difficult policy choices ahead. Allowing the SALT cap to expire essentially is the same as a tax cut and would add to the cost of the reconciliation bill. Several Republicans in Congress want the bill to include relief from the SALT cap. Discussions about how to provide relief recently have focused on raising the SALT cap rather than eliminating it and limiting the ability to claim the newly capped SALT deduction to individuals with income below certain thresholds (for example, individuals with income less than $500,000).
Other tax provisions being discussed as part of the reconciliation bill include:
Revenue raisers:
Tax cuts:
Congressional leaders have said they intend to have a reconciliation bill on the president’s desk by Memorial Day. Congress currently is out of session on Easter recess. However, negotiations and drafting continue so the reconciliation bill can be ready for markup when the House returns the week of April 28. Even if House Republicans pass a reconciliation bill that threads the needle for its diverse caucus (which includes members who support significant spending cuts, members who want SALT cap relief, members who want tax cuts for working-class individuals, and members who want tax cuts for businesses), the Senate would need to approve the bill without change to meet the end-of-May deadline. Given the differences within the Republican party and between the House and the Senate, it is difficult to gauge the likelihood of Senate approval until legislative text is released.
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