Senate Republicans passed a budget resolution on Feb. 21 that would reserve tax legislation for later in the year, but President Trump endorsed the House’s competing version, which Republicans hope to advance this week.
Trump offered his most enthusiastic endorsement of the House approach on social media last week:
“The House and Senate are doing a SPECTACULAR job of working together as one unified, and unbeatable, TEAM, however, unlike the Lindsey Graham version of the very important Legislation currently being discussed, the House resolution implements my FULL American First Agenda, EVERYTHING, not just parts of it! We need both Chambers to pass the House Budget to ‘kickstart’ the Reconciliation process, and move all of our priorities to the concept of, ‘ONE BIG BEAUTIFUL BILL.’”
Trump’s endorsement gives the House approach momentum, but the issue is not yet settled. The budget resolution will be critical for the fate of a tax bill, as budget reconciliation instructions will set the parameters that control the timing, scale and substance.
The Senate resolution embraces a two-bill approach, moving a narrower bill first and saving tax legislation for later in the year. The House budget would keep Republican priorities together but give tax writers $4.5 trillion in revenue decreases for tax changes — approximately the same budgetary figure as different tax measures expiring this year (which could be reduced or increased based on spending targets). The House version could also set up early deadlines for passage, make it hard to permanently extend the tax cuts and create difficult choices between tax priorities. See our prior Tax Legislative Update (opens in new tab) for more information.
House Republican leaders teed up a procedural meeting for their resolution on Feb. 24 and hope to advance it this week. But whether the bill — which could include $2 trillion in funding cuts — can earn enough votes remains an open question. Several House Republicans have expressed reservations over potential Medicaid and Supplement Nutrition Assistance Program (SNAP) benefit cuts that would likely be a part of that figure, though the resolution only requires committees to meet specific savings targets without detailing how to achieve them. Some fiscal and immigration hawks in the House Republican Conference appear to favor the two-bill approach since it achieves policy priorities while allowing them maximum leverage over tax and fiscal matters.
The House budget could continue to evolve as leadership looks to secure support, but if House Republicans struggle to reach agreement, it could create an opening for the Senate approach to prevail.
“If the House can produce one big, beautiful bill, we’re prepared to work with them to get that across the finish line,” said Senate Majority Leader John Thune, R-S.D., in response to Trump’s post, on Feb. 19. “But we believe that the president also likes optionality.”
The Senate budget resolution passed along party lines, 52-48 after a marathon debate on Feb. 20-21. Several amendments were offered, but only two successfully, one to allow possible adjustments to accommodate for preserving Medicaid funding and another to allow for possible adjustments to account for deregulatory policies.
Grant Thornton Insight:
Neither resolution contains actual tax policy details, which will still need to be hashed out regardless of whether it happens in one bill or two — a process that will still take weeks to months. But the budget debate will shape much of the legislative process. These resolutions are necessary vehicles for Republicans to use budget reconciliation to advance tax and funding priorities in the Senate with simple majority votes. A one-bill approach could theoretically speed up the process, and some time-sensitive issues, such as a debt ceiling increase and possible language addressing the scheduled sunset of the health insurance premium tax credit, could lend even more urgency than the income tax increases set to take effect at the end of this year, without congressional action. But even under that process, there will be no guarantees given the complications a historically narrow House majority may present.
For more information on the budget debate and its impact on tax policy see our Feb. 14 Tax Legislative Update.
Contacts:
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.
Share with your network
Share