Senate Republicans are taking a novel approach to writing a budget resolution that will unlock the process for writing a filibuster-proof reconciliation bill. First, the budget resolution passed by the Senate uses a current policy baseline for estimating the revenue impact of a follow-on reconciliation bill. Doing so allows Senate Committee on the Budget Chairman Lindsey Graham (R-SC) to assume an extension of the expiring provisions of the Tax Cuts and Jobs Act (TCJA), effectively erasing the nearly $4.6 trillion cost of making those provisions permanent, which the Joint Committee on Taxation scored last week. 

At press time, it wasn't immediately clear if the Senate parliamentarian would rule on the permissibility of the current policy baseline or if the Senate would proceed with it under the authority of Chairman Graham. The current policy baseline frees up $1.5 trillion for Senate taxwriters to address the president's tax cuts proposed on the campaign trail, such as exempting tips and overtime from federal taxation, as well as any additional provisions senators seek to add. By contrast, the House version uses a current law baseline that factors in the cost of extending TCJA provisions and assigns a top-line figure of $4.5 trillion for tax relief.

The Senate budget resolution also differs with the House in its spending reductions, setting low targets of $5 billion that Senate leaders intend to exceed by wide margins. The House plan sets a minimum of $1.5 trillion spending reductions with the expectation that at least $2 trillion in spending cuts can be found. This includes a directive to the House Committee on Energy and Commerce to find $880 billion in savings, presumably from Medicaid, that has some moderate lawmakers worried. Any amount below $2 trillion in savings would reduce dollar-for-dollar the $4.5 trillion tax cut. On raising the statutory debt limit, the Senate plan would direct the Committee on Finance to report a $5 trillion debt limit increase, while preserving instructions to the House Committee on Ways and Means to raise the debt limit by $4 trillion.

The dissonance between the two plans is intentional and to be ignored — for now. Republican leaders in Congress want to move the process forward and get to the point where they can write the implementing legislation in a way that both chambers can endorse. That requires approval of a single budget resolution by the Senate and House. The fact that it includes inherent contradictions or conflicting instructions is besides the point. What matters more than anything else is the stamp of approval with majority votes in both chambers.

The House may consider the new Senate budget resolution as early as this week. If the House can accept the changes sought by the Senate and approve the budget resolution, both chambers can start the process of writing a reconciliation bill.

House Speaker Mike Johnson (R-LA) still wants to get a final bill to the president by Memorial Day, but if the House does not act this week, a two-week Spring recess starting this Friday could easily push that timeline into the summer. #TaxTake

Upcoming Speaking Engagements & Events

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

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.