House and Senate Republicans are clashing over how to advance President-elect Trump’s tax agenda after incoming Senate Majority Leader John Thune (R-S.D.) offered a plan that would put off tax reform to first take action on border security and energy production.
Thune’s plan would set up two budget reconciliation packages that would allow the Senate to pass the border and energy bill, and the tax legislation with just 51 votes, preventing Democrats from filibustering the legislation.
But Rep. Jason Smith (R-Mo.), the chairman of the House’s powerful tax-writing Ways and Means committee, told reporters Wednesday he opposed putting tax reform on the back burner.
Smith raised concern over how tax reform would fare under Thune’s plan given the difficulty of moving two budget reconciliation packages, which under Senate rules cannot be filibustered. He also noted that House Republicans will have a tiny majority.
It is expected to be 220-215, but will be 217 to 215 at the beginning of the year because of former Rep. Matt Gaetz’s (R-Fla.) departure from Congress and moves by two other Republican lawmakers to join the Trump administration.
“There have not been two reconciliations that have been signed into law in the same year,” Smith said Wednesday evening. “And why would we think in a majority of 219 to 215 that we would over perform?”
“Let it be the first one. Let’s get it out,” he said. “I’m good with border [and] energy – as long as [there is] tax. Or if they want to do tax first, that’s what they should do. The president campaigned on it. It’s a priority.”
Rep. Lloyd Smucker (R-Penn.), another member of the Ways and Means Committee, offered a similar sentiment.
“My preference is we get right into doing the tax bill,” he said. “I think that’s going to be one of our most important pieces of legislation. We ought to get right on it. So, I’m hoping that we do that despite what they said over there.”
Other House Republicans said they wanted more details about what exactly Thune was envisioning.
“There was no meat on them bones,” Rep. Andy Harris (R-Md.), head of the hardline conservative House Freedom Caucus, said of Thune’s plan. “He wasn’t specific. It depends on what, specifically, he was talking about.”
Asked about similar comments Smith made earlier this week, Thune told reporters on Wednesday that Republicans “are headed to the same spot.”
“I mean, obviously, to get a path forward when you have unified control of government, sometimes it’s challenging, because you’ve got to have a House, Senate and White House all pulled in the same direction,” he said.
While he said Republicans “want the same things,” he also noted that “the tactics and strategies for how we get to the finish line are always subject to debate.”
Individual provisions in the Trump tax cuts are expiring at the end of 2025, which nearly all Republicans want extended.
Without that extension, income tax rates are set to increase, the standard deduction will decrease, personal exemptions and itemized expensing will return, and the controversial state and local tax (SALT) deduction cap will be lifted.
The SALT cap has long had Republican detractors, but there are other provisions prompting internal disagreements as well, including how much of the Democrats’ clean energy provisions in the Inflation Reduction Act (IRA) should be done away with.
Majority Leader Steve Scalise (R-La.) said Wednesday that fully repealing the IRA, which is popular in many Republican districts,“was never talked about” and that the Republican preference was to get rid of individual provisions like the $7,500 consumer credit for electric vehicles (EVs).
“That [credit] makes no sense, and it costs billions and billions of dollars to have that bad policy,” he said. “We’re going to be getting rid of those kinds of things. We’ve identified many funds like that, many items that are in current law.”
Scalise also said Republicans were looking to repeal parts of the Biden administration’s infrastructure law.
There’s also the issue for Republicans of what to do about all the tax cuts Trump proposed on the campaign trail. Those include getting rid of taxes on tips and overtime, canceling taxes on Social Security, and stopping the double taxation of Americans living abroad.
Looming over the debate is the issue of the national deficit, which ballooned to new levels after the pandemic and now stands at around $36 trillion, though a significant portion of that is money the government effectively owes itself.
One analysis by the Committee for a Responsible Federal Budget estimated that all of Trump’s proposed cuts could expand the deficit by as much as $15 trillion.
Budget hawks in the House have been sounding some fierce opposition, including Rep. Chip Roy (R-Texas), who reminded his party in November that not all tax cuts pay for themselves.
“Republicans cannot pretend there are not significant deficit concerns,” he told The Hill. “Not all tax cuts pay for themselves.”
Both parties have used budget reconciliation to prevent priority legislation from being blocked by a filibuster, which takes 60 votes to overcome. Republicans will have just 53 seats in the Senate next year.
Budget reconciliation was used to pass the Trump tax cuts in 2017 and was also used by Democrats during the first half of the Biden administration when they controlled both chambers of Congress.
Budget reconciliation preparations have already been underway this year with tax as a key focus.
Senate Republicans also blocked a tax deal worked out by Smith and Senate Finance Chairman Ron Wyden (R-Ore.) earlier this year that included tax breaks for businesses and a beef up Child Tax Credit (CTC) as some already had their eyes set on more comprehensive reforms in 2025.
“We’re talking billions in this tax deal. Next year, we’re talking trillions. So, I think it needs to wait and negotiate next year,” Sen. Thom Tillis (R-N.C.), a member of the Finance and Banking committees, said at the time.
Scalise told reporters on Wednesday that Democrats “stretched the limits of reconciliation” when the party controlled both chambers of Congress during the first half of the Biden administration.
In those first two years, Democrats used the arcane maneuver to bypass GOP opposition to approve a sweeping $1.9 trillion coronavirus relief package, known as the American Rescue Plan, in 2021. And they used the same strategy to pass the Inflation Reduction Act, a key component of President Biden’s economic agenda, the following year.
“We’re going to continue to go by what the parliamentarian allowed in that package of legislation at ‘21 which opened the door to many more things than we were able to do in 2017 so there’s precedent,” Scalise said Wednesday.
“It was talked about going in and taking those items that haven’t, I mean, some things have already been carried out, but there’s a lot of funds that are still unspent, there’s a lot of policies that are still holding back our ability to build things,” he said.
“No final decisions have been made on the full package,” Scalise added.
Al Weaver and Emily Brooks contributed.
