The tax fights Trump has to settle

Politico

2 days ago

IN TODAY'S EDITION:— The tax disputes that could come up today— Russ Vought hits the Hill— Senate finally takes up Trump's judges
Senate Majority Leader John Thune and his tax writers will huddle with President Donald Trump at the White House today as Republicans race to resolve a growing list of tax policy disputes in their megabill.
Thune detailed what to expect in an exclusive interview with our Jordain Carney:
BUSINESS TAX PERMANENCE: Thune emphasized that one of the biggest tax issues for him and other Finance Republicans is making key business tax incentives, such as full expensing for research and development costs, permanent.
'There's a lot of interest in growth in the economy among our caucus,' Thune told Jordain. 'Permanence, I have been told by a number of our members, is a red line for them.'
But it's a costly ask, and senators have been cagey on how they'll make the numbers work.
TAXES ON TIPS: One long-shot idea that could come up is from Sen. Thom Tillis, who suggested to our Brian Faler that the $40 billion 'no tax on tips' proposal could drop out of the bill and get passed later on a bipartisan basis.
Don't expect Trump to jump at the idea. Trump campaigned on making tips tax-free, and it's one of his top priorities in the megabill.
CLEAN-ENERGY CREDITS: Tillis could also use the White House visit to escalate his concerns about House Republicans' plan to gut clean-energy tax credits. Tillis and Sens. Lisa Murkowski, John Curtis and Jerry Moran previously warned GOP leaders that a full-scale repeal won't fly in the Senate. Democrats are working to drive a wedge on the issue.
SALT: Some GOP senators are pushing back against the deal House GOP leaders struck with blue-state moderates to quadruple the state-and-local-tax deduction cap to $40,000. Thune signaled to Jordain that the Senate is likely to scale it back.
'It would be very, very hard to get the Senate to vote for what the House did,' Thune said.
But SALT Republicans are digging in. Rep. Nick LaLota told Lisa Tuesday that such a move could 'unwind many of the other connected policies' in the many interlocking deals Speaker Mike Johnson negotiated to muscle the first draft of the megabill through his narrower majority.
'It would likely stall the bill,' LaLota warned.
Meanwhile, Thune seems optimistic as he works to douse other flare-ups within his conference (Medicaid, food aid) and outside of it (hello, Elon Musk).
The majority leader also told Jordain he expects every committee to release its bill text by the end of next week as he pushes toward a pre-July 4 vote. Armed Services kickstarted that process Tuesday with draft text that increases funding for nuclear weapons, munitions production and new technology beyond what the House GOP proposed.
POLITICO Pros can dive deeper into the full Thune Q&A.
GOOD WEDNESDAY MORNING. We see the Longworth mural we heard about in April is finally installed. It was probably a good call to leave the speaker's face off this time — wouldn't want to risk a curse, now.
Follow our live coverage at the Inside Congress blog at politico.com/congress and email your Inside Congress scribes at [e-mail], [e-mail] and [e-mail].
THE SKED
The House is in session and voting on legislation fighting the opioid crisis at 1:30 p.m. and 4:30 p.m.
— Republicans and Democrats will hold their separate weekly conference meetings at 9 a.m.
— GOP leaders will hold their post-meeting news conference at 10 a.m.
— Appropriations will have a hearing on the presidential budget request for the FAA, with acting Administrator Chris Rocheleau testifying, at 10 a.m. The committee will have another hearing on the presidential budget request for OMB with Director Russ Vought testifying at 2 p.m.
— Armed Services will have a hearing on the Army's fiscal 2026 posture with testimony from Army Secretary Daniel Driscoll at 10 a.m.
— Agriculture will have a hearing on digital assets at 10 a.m.
— Financial Services will have a hearing on digital assets at 10 a.m.
— Oversight will have a hearing on fraud risk within the Defense Department at 10 a.m. and a hearing on NGOs at 2 p.m.
— Foreign Affairs will have a hearing on NATO challenges at 10 a.m.
— Small Business will have a hearing on the presidential budget request for the SBA with testimony from Administrator Kelly Loeffler at 10 a.m.
— Education and Workforce will have a hearing on the policies and priorities of the Education Department at 10:15 a.m.
— Energy and Commerce will have a hearing on illegal robocalls and robotexts at 10:15 a.m.
— Democratic leaders will hold their post-meeting news conference at 10:45 a.m.
— Blockchain Association will have its inaugural Summer Series event featuring Financial Services Chair French Hill and Reps. Dusty Johnson and Bryan Steil this afternoon.
— The Welcome PAC will host the day-long event 'WelcomeFest' featuring centrist Democrats, including Sen. Elissa Slotkin and Rep. Jared Golden.
The Senate is in session and voting to end debate on Michelle Bowman's nomination to be vice chair for supervision of the Board of Governors of the Federal Reserve System and Edward Walsh's nomination to be ambassador to Ireland at 11:45 a.m. The Senate will then vote to end debate on James O'Neill's nomination to be deputy secretary of HHS at 2 p.m. and vote on Bowman and Walsh's nominations at 6 p.m.
— Appropriations will have a hearing on the president's fiscal 2026 budget request for Commerce with Secretary Howard Lutnick testifying at 10 a.m.
— Foreign Relations will have a hearing on transnational criminal organizations at 10 a.m. and another hearing on China's influence in Africa at 1 p.m.
— HELP will have a hearing on the reauthorization of the over-the-counter monograph drug user fee program at 10 a.m.
— Judiciary will have a hearing on nominees to fill vacancies across federal courts at 10:15 a.m.
— Republicans will have a conference meeting at 2:30 p.m.
— Veterans Affairs will have a hearing to consider the nominations of Cheryl Mason to be inspector general and Donald Bergin III to be an assistant secretary, both of the Department of Veterans Affairs at 4 p.m.
— Finance will meet with Trump at the White House to discuss tax policy disputes in the GOP megabill at 4 p.m.
The rest of the week: The House will consider SBA legislation related to immigration. The Senate will continue to take up nominations.
THE LEADERSHIP SUITE
Rescissions to 'test' appetite for codifying DOGE cuts
House Republicans are getting ready to vote next week on the $9.4 billion rescissions request Trump just sent over. House Appropriations Chair Tom Cole says it'll be 'a big test case' of Congress' appetite for codifying DOGE cuts, our Jennifer Scholtes writes in.
The Oklahoma Republican said the clawbacks package is expected to go straight to the floor, bypassing his panel, since top GOP appropriators privately negotiated the request with the White House. 'We feel like we were included and don't feel the need to run it through the committee,' Cole told reporters Tuesday night. Johnson and his deputies urged their members to 'support this commonsense measure' in a statement late Tuesday.
What we're watching: Vought is on the Hill today, testifying in front of House Appropriations on behalf of the OMB budget. Expect plenty of questions about rescissions, impoundments and other cuts to come.
Jeffries 'strongly and firmly behind' charged Dem
House Minority Leader Hakeem Jeffries voiced support for Rep. LaMonica McIver on Tuesday, two weeks after the New Jersey Democrat was charged with assault in connection with a scuffle at an ICE detention center.
'What's important is that we stand strongly and firmly behind LaMonica McIver,' Jeffries said. 'That's priority No. 1, to make sure that she has the first-rate legal representation that she needs to battle these charges.'
Separately, Rep. Jamie Raskin is requesting a raft of documents from the DOJ on the decision to charge McIver.
POLICY RUNDOWN
MOVEMENT ON MEDICAID — Sen. Jim Justice previously expressed reservations about the House-passed megabill's freeze on new provider taxes that states use to help fund their Medicaid programs. Now, he's on board with the changes.
'I'm fine and dandy freezing it,' Justice told reporters. 'The thing I'm most concerned about is that if we don't watch out, we get running in a direction, then we just think, well we just got to cut more and more, and before you know it, we cut right into the bone.'
Others are still working through the issue. Sen. Josh Hawley told reporters he remains worried about the provider tax provisions, while Tillis said he's talking with North Carolina hospitals and Medicaid program administrators across the country to determine what the potential impacts could be.
AI MORATORIUM UNDER FIRE — Democrats are itching to challenge a 10-year ban on states enforcing artificial intelligence laws in the House GOP-passed megabill, with Sen. Ed Markey being the first to vow to do so under the chamber's rules, our Anthony Adragna reports.
If the provision isn't stripped out first in the Senate version of the package, Markey could challenge it under a point of order on the chamber floor. However, many Republicans are skeptical that it could pass muster with the Senate parliamentarian, who arbitrates the chamber's rules.
'It is going to be clear that this 10-year state AI regulation is a policy change that has no impact on the federal budget,' Markey said. 'That provision cannot be included in a reconciliation bill.'
Republicans are also piling on. Rep. Marjorie Taylor Greene said in an X post that she wasn't aware of the provision in the bill — which she voted for. 'It is a violation of state rights and I would have voted NO if I had known this was in there,' she wrote.
SENATE'S CRYPTO TURN — Cryptocurrency-friendly senators expect to unveil landmark legislation this month that would divide up oversight of digital assets between regulators, our Jasper Goodman reports.
It's a sign that the Senate will soon ramp up the next phase of its push to pass industry-friendly crypto measures after the House introduced a so-called market structure bill. The House measure will be the focus of two separate hearings on Wednesday in the Financial Services and Agriculture committees.
Sen. Cynthia Lummis said Tuesday the Senate's product is 'going to look very much like the House bill.'
IN THE DOGEHOUSE — A House Oversight subcommittee will scrutinize fraud risk in the Defense Department during a hearing this morning, with testimony from a deputy Pentagon inspector general and an official from the Government Accountability Office, Maia writes in. It comes after a GAO report found $10.8 billion in fraud within DOD for fiscal years 2017 through 2024.
Wednesday's hearing aligns with the Department of Government Efficiency's stated goal of eliminating fraud in agencies by slashing federal spending, which the administration plans to continue despite Musk's exit last Friday, our Robin Bravender, Danny Nguyen and Sophia Cai report.
TRUMP'S JUDICIARY NOMINEES INCOMING — Nearly six months into Trump's second term, the Senate will finally start to consider his nominees to fill vacancies across federal courts. On Wednesday, Senate Judiciary will consider picks for vacancies in Missouri and on the Sixth Circuit Court of Appeals, our Hailey Fuchs reports.
Trump's efforts to apply a conservative tilt to the federal judiciary was a marquee accomplishment of his first term. His administration confirmed hundreds of judges — but so did the subsequent Biden administration, leaving relatively few vacancies for Trump to now fill.
Best of POLITICO Pro and E&E:
THE BEST OF THE REST
When a U.S. senator's husband landed on a travel watchlist, a phone call had him removed, from Jennifer Jacobs at CBS News
Gillibrand's dual role: The Republican-friendly Democratic campaign chief, from Burgess Everett at Semafor
Can Bruce Pearl run for Senate as a Republican? Seems unlikely after Democrat donations, from Michael Yaffee at Yellowhammer News
CAPITOL HILL INFLUENCE
Chris Bowman is now director of government affairs at the Carbon Removal Alliance. He previously was a senior professional staff member for the Senate Energy and Natural Resources Committee and is a Joe Manchin, Steny Hoyer, Conor Lamb and Mike Doyle alum.
Tara Hupman is now VP of external affairs at the American Clean Power Association. She was most recently general counsel to the House Republican Conference under Chair Lisa McClain and previously served as chief counsel on the House Energy and Commerce and Natural Resources committees.
Natalia Díez Riggin, a former top staffer to Senate Banking Chair Tim Scott and Sen. John Kennedy, has been named the SEC's director of legislative and intergovernmental affairs. She's been serving in the role in an acting capacity since January.
JOB BOARD
Cathy McMorris Rodgers, the former Energy and Commerce chair, is launching a nonprofit aimed at inspiring a new generation of leaders. The Cathy McMorris Rodgers Leadership Institute will be based in Spokane, Washington, and be led by her former district director Kristina Sabestinas, with longtime campaign official Dawn Sugasa serving as senior adviser. It will offer programming, grants (including annual fellowships) and policy advocacy.
Former Sen. Jon Tester and former FEC Commissioner Ellen Weintraub are joining End Citizens United as the organization's first senior fellows.
Adam Taylor is now Rep. Scott Peters' D.C. chief of staff. He was previously Peters' legislative director. Dillon Cooke is now Peters' legislative director. He was previously Peters' senior legislative assistant for healthcare.
Eric Ettorre has joined the Treasury Department as senior adviser to the Office of International Trade and Development. He previously was trade counsel for the Committee on Ways and Means and handled tariffs, customs and China, among other portfolios, for Chair Jason Smith.
HAPPY BIRTHDAY
Sen. Mike Lee … Reps. Chris Pappas, Marie Gluesenkamp Perez and Jim Baird (8-0) … Colby Itkowitz … Meta's Ryan Daniels … Dentons' Jason Attermann … Mike Murphy
TRIVIA
TUESDAY'S ANSWER: Joan Kleinman correctly answered that the average age of the newly elected House members of the 119th Congress is 50.2.
TODAY'S QUESTION, from Monday's winner Timothy Trent: Which president said, 'When they call the roll in the Senate, the senators do not know whether to answer 'present' or 'not guilty''?
The first person to correctly guess gets a mention in the next edition of Inside Congress. Send your answers to [e-mail].