Fresh off a two-week recess, the House and Senate will finally start the heavy lifting on drafting a reconciliation bill. The House is expected to go first, with committees of jurisdiction scheduling markups this week on their respective tax, spending, or cost-cutting instructions. 

The most significant markups in the House – by the Committee on Energy and Commerce to identify cuts to Medicaid and other spending programs of $880 billion and by the Committee on Ways and Means to develop a $4.5 trillion tax package – are tentatively scheduled for the week of May 5 and May 12-13, respectively. The so-called "Big Six" – Secretary of the Treasury Scott Bessent, National Economic Council Director Kevin Hassett, Senate Majority Leader John Thune (R-SD), House Speaker Mike Johnson (R-LA), Senate Finance Committee Chairman Mike Crapo (R-ID), and House Ways and Means Committee Chairman Jason Smith (R-MO) – will all meet this week to discuss the president's tax agenda for reconciliation.

The Committee on Ways and Means markup will be the first opportunity for taxpayers to see the details of the scope and terms of tax relief, as well as potential revenue offsets, being proposed for inclusion in the tax reconciliation package. Importantly, Committee on Ways and Means will develop its package using a current-law baseline, whereas a future Senate Committee on Finance markup will be based on a current-policy baseline. Given these different fiscal parameters, Committee on Ways and Means could potentially provide the low-water mark of tax relief that is included in the ultimate bill, as well as the high-water mark of potential revenue offsets given the greater flexibility that the Senate Committee on Finance will have under the current-policy baseline.

In addition to the substance of the provisions contained in the Committee on Ways and Means markup, it will be important to monitor and analyze the proposed effective date of these provisions – particularly with respect to any proposed revenue offsets. These initial proposed effective dates – whether they be the date of the markup, date of the enactment of the bill, or otherwise – tend to stick as the bill moves through the legislative process.

It is unclear when the Senate Committee on Finance and other Senate committees with budget instructions will hold their own markups. At a minimum, we expect some lag between House and Senate action. This delay will provide an ideal opportunity for interested parties to review the Committee on Ways and Means package and propose any changes – either to the tax relief measures or revenue offsets – to the Senate Committee on Finance.

Although the House is moving forward with a target date of Memorial Day, the delay in consideration by the Senate will shift the timing of the process to negotiate – perhaps by formal conference committee – a compromise package between the House and Senate. One significant factor looming over the ultimate timing of the process is the so-called "X date" whereby the debt limit will need to be addressed. There are reports that Treasury will give an estimated X date as early as this week, which could provide some breathing room or accelerate the process, perhaps even forcing the issue to be considered outside of reconciliation.

If the reconciliation process slips past Memorial Day, the congressional schedule provides month-long clips of time for further consideration. The next big dates for concluding action on reconciliation are the Fourth of July break and the August recess. Odds are a bill signing ceremony at the White House will be a summer affair rather than a spring fling. #TaxTake

In the News

Marc commented in Bloomberg Government on the current state of tax policy discussions in Washington: "I think it's a little bit of the calm before the storm."

Jorge was quoted in Tax Notes on the evolving dynamics between the House and Senate as Congress prepares to tackle reconciliation and the status of congressional negotiations. "I think those final calls haven't been made yet, but I think that they're getting closer every week" to having a package ready, he said.  

Upcoming Speaking Engagements

Marc will present the American Staffing Association (ASA) webinar "Federal Tax Policy in Transition: Elections, Expiring Cuts, and What's Ahead" on May 1.

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