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Forbes
6 days ago
- Business
- Forbes
One Big Beautiful Bill: Breaking Down The House Tax Package
UNITED STATES - DECEMBER 15: HOUSE CHAMBER—The Speaker's well on the House floor. (Photo by Scott ... More J. Ferrell/) In this episode of Tax Notes Talk, Tax Notes Capitol Hill reporters Cady Stanton and Katie Lobosco discuss the final version of the House's reconciliation bill and what's next as the legislation heads to the Senate. Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for clarity. David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: reconcilable differences. On May 22 the House passed the One Big Beautiful Bill Act, a giant reconciliation bill that has been hotly debated over the past few months. Factional disagreements over the state and local tax deduction cap and energy credits, as well as the need to balance tax cuts with revenue raisers, made the road to a finished bill a rocky one. So how did those issues get resolved, and what's next for the bill as it goes to the Senate? You can find a link to our deep dive into the clean energy tax credit changes in the show notes. But joining me now to walk us through the bill as a whole are Tax Notes Capitol Hill reporters Cady Stanton and Katie Lobosco. Cady, Katie, welcome back to the podcast. Cady Stanton: Thanks for having us. Katie Lobosco: Good to be here. David D. Stewart: So there was a bit of drama leading up to this bill. Could you walk us through what happened in the lead-up to the vote? Katie Lobosco: Sure. There was still a lot of moving parts a week out from this vote. House Speaker Mike Johnson would later look back and call it "a perilous time with a number of pivotal moments." So one of the first signs of some trouble came when it was time for the House Budget Committee, which combines different parts of the bill together. They failed to advance the legislation. Now, this was the Friday before the vote. So, initially, four members on that committee — members who are part of the staunchly conservative House Freedom Caucus — they voted against advancing this bill. So they took the weekend to negotiate a little bit more, and that committee came back on Sunday at 10 p.m. to revote, and they were able to advance the bill at that point. Now, Monday came, and Johnson tells reporters, "We're still building consensus; there's still some sticking points that have yet to be decided." These were things like the SALT cap and cuts to the Medicaid program. But Tuesday comes, and there's a little bit of a shift on the Hill. President Trump comes to speak to the Republican caucus, and several members come out of that meeting saying they think the president moved the needle and we're getting closer to where we need to be. House leaders start singing a different tune, and the leaders say the time for talk is over. That comes partly true. On Wednesday — early Wednesday, 1 a.m. — the Rules Committee convenes. Now, they're the last committee to have to vote on the bill before it heads to the floor, but we still don't have a final bill text yet. They're still hammering out some of these details, and some of the holdouts — again from the House Freedom Caucus — they're still concerned about the deficit impact of the bill. They go and meet with the White House, and they return, and House Speaker Mike Johnson says, "We're going to move forward." WASHINGTON, DC - MARCH 20: Speaker of the House Mike Johnson (R-LA) speaks during a news conference ... More following a closed-door caucus meeting at the U.S. Capitol Visitors Center on March 20, 2024 in Washington, DC. Congressional leaders announced Tuesday they had reached a deal on a FY2024 spending package that includes budgets for about three-quarters of all federal discretionary spending, including Defense, Homeland Security, Labor-Health and Human Services, and other bills. Without a deal, the federal government would be facing a partial shutdown at midnight on Friday. (Photo by) We're about 5 p.m. now; we still don't have a bill text. The Rules Committee is still meeting, and we finally get this final bill, what we call the manager's amendment, that makes changes to the bill around 9 p.m. Rules advances it out of committee by midnight, and eventually the final vote happens just before 7 a.m. David D. Stewart: So tell me about this manager's amendment. What sort of changes were being made by the Rules Committee? Cady Stanton: Yeah, it's really important to point out that manager's amendment because, as Katie was mentioning, there were quite a few changes in the 11th hour to this bill. So some context on timeline here, since it all came together quite quickly. The original full bill text was released May 12, ahead of the House Ways and Means Committee markup, then amended slightly through the Budget Committee May 19, and finally that manager's amendment with the biggest swath of changes was released late May 21, less than 12 hours before the final vote. Those changes included a further increase on the SALT cap — even higher than the $30,000 cap set in the original version of the bill. It also included accelerated phaseouts for clean energy credits from the Inflation Reduction Act, with carveouts for nuclear energy projects and changes to transferability rules. There were also adjustments to FDII, GILTI, and BEAT calculations. That manager's amendment also undid a repeal originally in the bill on the excise tax for indoor tanning services, which is very specific. And there were also changes to itemized deduction limitations for those with income in the highest tax bracket. The point of these, as Katie discussed, was largely to convince holdouts. There were also some changes to Medicaid work requirements to please the House Freedom Caucus, and SALT members in the end were pretty happy with the SALT cap in the bill, and they called it a victory for SALT on social media. David D. Stewart: So how did the votes shake out ultimately? Katie Lobosco: In the end, the bill passed the house 215 to 214. So there were two Republicans that voted no — Thomas Massey of Kentucky and Warren Davidson of Ohio — and they have concerns about how much this bill will add to the deficit. I'll note that House Freedom Caucus Chair Andy Harris, he voted present. He wanted to move the bill along in the process, but he said, "There is still a lot of work to be done in deficit reduction and ending waste, fraud, and abuse in the Medicaid program." And then there were two Republicans that actually missed the vote that raised some eyebrows, because they were David Schweikert of Arizona and Andrew Garbarino of New York, and they were both very involved in getting this legislation together. Schweikert had just missed the vote; he showed up at the last second and didn't get his vote in. And Garbarino apparently fell asleep, according to Mike Johnson. Again, this vote was just before 7 a.m. in the morning. They had been going all night, and he didn't get to the floor in time to vote. David D. Stewart: So let's turn to the actual content of the bill. What sort of tax cuts are we seeing in the legislation heading to the Senate? Katie Lobosco: So the bill would extend most of the individual and estate provisions of the Tax Cuts and Jobs Act, which are set to expire at the end of this year. So it makes permanent lower tax rates for individuals and makes the expiring standard deduction permanent and temporarily boosted by $1,000 for individuals and $2,000 for joint filers through 2028. It permanently extends the child tax credit at $2,000, with a $500 boost through 2028, and it increases the estate and gift tax exclusion from $14 to $15 million for individuals and from $28 to $30 million for couples in 2026 and indexes that amount to inflation thereafter. There's also some reforms to business taxes: The bill would permanently increase the passthrough deduction from 20 to 23 percent, and it also would slightly adjust and make permanent three international business provisions. One is the amount of foreign-derived intangible income, known as FDII, that a domestic corporation can deduct. There's the GILTI, which is the amount of a corporation's global intangible low-taxed income deduction, and BEAT, the base erosion and antiabuse tax. David D. Stewart: So you mentioned that there was an increase in the SALT cap. What happened with the SALT cap and these energy credits? Cady Stanton: Absolutely. SALT was definitely the producer of the most drama over the past few weeks, particularly in the tax realm. For context, the SALT cap is currently set at $10,000, and that was set by the TCJA, but that provision is set to expire at the end of 2025. So after a lot of late-night meetings and pretty loud pushes from Republican members of the SALT Caucus, the bill in the end included an increase on the SALT cap to $40,000. It also included a phaseout for that cap, starting at people who make income over $500,000, and there's also a slight increase both in that cap and that phaseout every year until 2033. And after 2033 it remains what it was for 2033, so it doesn't go back down. Now, this high number was considered a pretty big win for the SALT Caucus, but it's important to note that there really aren't that many SALT allies in the Senate, particularly among Republicans. So it would be pretty surprising if this stays as-is after the Senate is done with the bill. Now, turning to the IRA credits. When we talk about IRA, we're obviously referencing the Inflation Reduction Act, a bill that was passed by Democrats in 2022 and included a variety of clean energy tax credits. At the time the bill was passed, there was a certain cost estimate for these credits, but that estimate has gone up significantly, according to estimates from the Joint Committee on Taxation. As a result, the credits have been the target of Republican ire ever since, especially after they achieved the trifecta of the White House, Senate, and House control in November. Now, the reconciliation bill includes a mix of accelerated phaseouts and repeals of those credits, including the electric vehicle credits. The wording in the bill would restrict Chinese involvement in projects under this "foreign entities of concern" clause, and the reconciliation bill also specifically targets wind and solar power projects with restrictions. There are specific carveouts for nuclear projects that were included as a way to appease some moderates concerned about these cuts. And the last-minute changes to the bill specifically targeted restrictions on the clean electricity investment and production tax credits. BEIJING - OCTOBER 02: Chinas national flag is flown during a rock-and-roll festival to mark Chinese ... More National Day on October 2, 2005 in Beijing, China. Various activities are being held in China to mark the National Day. (Photo by) David D. Stewart: Now, what became of President Trump's campaign promises? Things like no tax on tips, no tax on social security? Katie Lobosco: So a lot of his priorities did get in the bill, but they got in as temporary measures, so they are only implemented for a certain amount of time. Why would lawmakers do this? That would reduce the overall cost over the 10-year budget window, which is how it's usually estimated. So, for Trump's priorities, the bill does make tip and overtime income deductible through 2028. Now, the bill doesn't touch Social Security specifically — that might run afoul of certain rules in the Senate — but it does increase the standard deduction for seniors by $4,000 through 2028. It also makes auto interest deductible for owners of cars made in the U.S. through 2028. The bill also creates what it calls Trump Accounts. These would be tax-advantaged savings accounts, and the government would contribute $1,000 for children born between 2025 and 2028, and it would also temporarily restore a trio of business tax cuts. This includes immediate expensing for domestic research and development through 2029, 100 percent bonus depreciation also through 2029, and 100 percent expensing for qualifying structures for which construction begins before the end of 2028 and the placed-in-service date occurs before the end of 2032. David D. Stewart: Now, you mentioned that some lawmakers were having trouble with the price of this bill. So what did it come out to in the end? What sort of costs are we expecting from this bill? Katie Lobosco: So the key takeaway here is that the bill overall will increase projected deficits by nearly $3 trillion over a 10-year period. Now, some Republicans are claiming it won't add to deficits because the changes will spur so much economic growth, but that's just not likely to be the case, according to a number of independent analysts. Since there were last-minute changes in the bill, we don't have a full official score from the Congressional Budget Office at this time, but the Penn-Wharton budget model has done its own estimates, and they find that the bill as written would increase deficits by $2.8 trillion over 10 years. The tax provisions alone would cost $4.3 trillion over 10 years. Most of that is due to the extensions of the TCJA's individual and estate tax provisions. The bill also boosts spending on defense and border security. The House did find more than $1.5 trillion in savings, mostly from changes to Medicaid, food assistance programs, and changes to federal student loans, but that only partially offsets the cost. David D. Stewart: So what are we expecting to happen next when this bill gets to the Senate? Cady Stanton: That's a really great question in terms of looking ahead. So passage through the House was a huge win for Republicans, and particularly for House Speaker Mike Johnson, who a lot of people honestly underestimated. He proved he can whip votes for passage within a very thin margin for his conference. But there's more tough work ahead for Republicans in the Senate, where members haven't been shy to share their laundry list of desired tweaks. Top of the list for many members, as they told Katie and I, is more permanency on provisions that the House bill makes temporary, including the three big promises from President Trump on the campaign trail: no tax on tips, no tax on overtime, and a bonus deduction for seniors, all of which currently end in 2029, as Katie mentioned. And that would be at the end of President Trump's presidency, as well. There's also a push to make permanent that trio of business tax cuts from the TCJA that Katie mentioned, and those had already started to expire or phase out, and this bill would restore them, and senators would really want to make that restoration permanent. As I said before, I also wouldn't be surprised to see changes to the SALT cap, as well as a fresh look at the IRA credit changes in the bill. A few senators have already mentioned that they're pretty worried about the impacts on their districts from repealing and phasing out these credits, where projects have been really bolstered by these tax credits. Finally, jumping back to what Katie was saying about the cost, the deficit impact of the bill will likely take a pretty large role in conversations over the next few weeks, as it did in the House with the deficit hawks. The Senate is going to use this current-policy baseline we've talked about before, which gives them some more flexibility to their scoring on the legislation, but some deficit hawks — specifically Senators Rand Paul and Ron Johnson — have already said that they want to see deficit reduction be top of mind in talks of changes in the coming weeks. So expect that to be a big part of the conversation. David D. Stewart: What are we expecting as far as the timeline? When should we expect movement to happen in the Senate? Cady Stanton: It's really tough to read exactly when the next step might be taken in the Senate, but there are a couple of important dates to pay attention to to see how things progress. The Senate won't get its chance to leave its mark on the bill until it returns from recess June 2, but once they return, senators will get to work on their changes to the bill ahead of this July 4 deadline. That's been suggested by Treasury Secretary Scott Bessent and reiterated by Republican leaders in recent weeks. There's also the chance that after changing the bill in the Senate, the House wants to change it again, which would send it back to the Senate a second time and obviously would extend the timeline, as well. WASHINGTON, DC - MARCH 13: Treasury Secretary Scott Bessent speaks to reporters outside the West ... More Wing after doing a television interview on the North Lawn of the White House on March 13, 2025 in Washington, DC. Bessent stopped to speak to reporters briefly and took a question on tariffs and voiced his concerns about a potential government shutdown. (Photo by) Like the Memorial Day deadline that the House set for itself, this July 4 deadline is largely self-imposed, but members do have a hard deadline for this version of the bill because it includes a debt limit extension. The "X date" for the debt limit could come in early August, so Treasury Secretary Bessent has encouraged Congress to get that addressed by mid-July, and it has to be done by the end of July since the House and the Senate take the entire month of August off. Now, it's important to note that they could always pull the debt limit out of the bill and work on it separately, but that would definitely disrupt the balance of the legislation and create some problems that would require Republicans to go back to the drawing board on the bill and on reconciliation in general. Another big factor on the timing of when this moves to the Senate is how Republicans in that chamber choose to make the changes they want. I wrote a pretty in-the-weeds story recently on the procedural options that senators have for these changes, but what it really comes down to is how much of an opportunity members will push for to be heard on the changes they want. Senate Majority Leader John Thune has said pretty openly that he wants to return to regular order in the Senate, which would draw out a process for amendments on the bill that would really stretch out work and create issues with the thin majorities that Senate Republicans have on their committees. But that process might also just be necessary, given how many people want changes, not just to the tax title of the bill, but also to areas like these SNAP and Medicaid program changes. Now, senators and their staff are likely working on filling out which of those choices they want to move forward with during recess, so it's worth keeping an eye out for which method they decide upon. David D. Stewart: Well, definitely sounds like they're going to be keeping you two busy for the next few months. Thank you for being here. Cady Stanton: Thanks, Dave. Katie Lobosco: Thank you.
Forbes
29-04-2025
- Business
- Forbes
Budget Votes And Tax Cut Hopes: Congress's Path To Reconciliation
WASHINGTON, DC - OCTOBER 24: The U.S. Capitol Dome is seen as House Republicans continue to search ... More for a Speaker of the House in the Longworth House Office Building on Capitol Hill on October 24, 2023 in Washington, DC. Members of the GOP conference met for a closed-door vote to select their nominee for Speaker of the House to succeed former Speaker Kevin McCarthy (R-CA), who was ousted on October 4 in a move led by a small group of conservative members of his own party. The Republicans nominated Rep. Tom Emmer (R-MN) today but he has already dropped out of the running after it became clear he could not secure enough votes to be elected Speaker. (Photo by) In this episode of Tax Notes Talk, Tax Notes Capitol Hill reporters Cady Stanton and Katie Lobosco outline Congress's progress on drafting the tax-focused reconciliation bill and the obstacles still remaining. Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for clarity. David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: The bill is due. With many of the Tax Cuts and Jobs Act provisions scheduled to sunset at the end of 2025, all eyes have been on Congress's progress toward a tax bill. But before they could focus on the contents of that bill, legislators had to get something else squared away: the budget framework. So how did the votes shake out on the framework, and what hurdles still remain on the path to a finished tax bill? Joining me now to walk through all of this are Tax Notes Capitol Hill reporters Cady Stanton and Katie Lobosco. Katie, Cady, welcome to the podcast. Cady Stanton: Thanks for having us. Katie Lobosco: Yeah, glad to be here. David D. Stewart: So let's start with you, Katie. What is the latest that we've heard on this issue? Katie Lobosco: So before Congress left on a two-week recess, the House passed the Senate-amended budget on April 10. Now, this unlocks the reconciliation process and paves the way for one bill that addresses much of President Trump's agenda, including the extension of the expiring provisions of the TCJA. Now, this budget resolution has taken up a lot of the legislative calendar so far this year. The House and the Senate both passed their own versions of the budget back in February, but both chambers must pass an identical budget resolution to be allowed to use reconciliation. And this is a process that lets the Senate pass a bill with a simple majority, and in this case, the GOP can pass it without Democratic votes. So the Senate amended the House's budget on April 5, sent it back to the House, and this is where we saw some drama. So in the days leading up to the House vote, many deficit hawks in the House and many Freedom Caucus members told us they were going to vote 'no' on this. There was no changing their mind. The issue was that the Senate-amended version doesn't go nearly as far in demanding spending cuts that the House wanted. So an hour or so before the vote was scheduled, we see a lot of these supposed 'no' votes marching into Senate Majority Leader John Thune's office. They're seeking assurances that there will be more spending cuts that are aligned with the House version. And overnight, most of those 'no' votes had flipped, citing assurances that they got from Republican leadership and the White House about spending cuts. In the end, there were just two 'no' votes: Tom Massie of Kentucky and Victoria Spartz of Indiana, both who were concerned about deficit issues. Now, it's worth noting there was no change in the text of the bill guaranteeing more spending cuts. Basically at a press conference the morning of the vote, Thune said that there were a lot of senators that really believed that there should be more spending cuts, but he didn't make a formal assurance about this. David D. Stewart: What can we expect in a reconciliation bill around the tax issues? Cady Stanton: So this reconciliation bill is expected to be pretty large, and it's going to cover a variety of policy areas, but tax is a top priority in this bill because it has a really important upcoming deadline, as you mentioned. The main aim of the tax portions of the reconciliation bill will be to extend the expiring provisions from the TCJA. That includes individual income tax rates, expanded child tax credit, the SALT cap, estate tax changes, things like that. They're all scheduled to sunset at the end of 2025. Not everything in the TCJA was temporary — obviously the corporate tax rate, international tax reform were permanent — but as a result of the deadline at the end of 2025, those expiring provisions are likely going to be the primary focus of this year's reconciliation bill. Beyond that, there are a lot of additional provisions that could definitely be included and are being discussed as being on the table right now. Some talk has included a hike in the SALT cap; no tax on tips, which was one of President Trump's promises on the campaign trail and one that he's talked about since he has taken up the White House; the expanded child tax credit has been mentioned; tax relief for seniors; changes to the low-income housing tax credit — all of those are part of the conversation here. But while they're all on the table as possibilities, it's going to be dependent on how much lawmakers want to impact the deficit and include possible other pay-fors in what's going to be part of the larger bill in the end. ZEBULON, GEORGIA - OCTOBER 23: Republican presidential nominee, former U.S. President Donald Trump ... More looks on during a roundtable with faith leaders at Christ Chapel on October 23, 2024 in Zebulon, Georgia. Trump is campaigning across Georgia today as he and Democratic presidential nominee, U.S. Vice President Kamala Harris attempt to win over swing state voters. (Photo by) David D. Stewart: What sort of things did we see in this budget resolution that we can expect to see in the final bills? Katie Lobosco: Well, so the budget is very important to unlocking this process, but at the end of the day, it's just a blueprint. It's not law; it doesn't have policy specifications. What it does, basically, is provide instructions to the House and Senate committees setting spending and revenue targets. But here's where things get a little complicated: This budget resolution provides different instructions to the House than it does for the Senate. For example, the Senate instructions mandate a floor of $4 billion in spending cuts across the federal government, while the House section requires $1.5 trillion in cuts. And when it comes to taxes, there's another big difference. The Senate Finance Committee is given $1.5 trillion for new tax proposals, but also scores the extension of the existing tax cuts as costing nothing. The House Ways and Means Committee, on the other hand, gets $4.5 trillion for both new tax proposals and the extensions. There is a caveat there: If the House doesn't achieve $2 trillion in spending cuts, that $4.5 trillion for tax cuts could go down as low as $500 billion. Basically, this gives us a range for the tax cuts, is the way I like to think about it. Bipartisan Policy Center's Andrew Watts told me that he puts this range between $4 trillion and $5.3 trillion. David D. Stewart: So I know there's been some drama around how this is all going to get scored. So what is happening with budget scoring? Cady Stanton: So you may have heard the phrase, especially in the news and by lawmakers lately, of a current-policy baseline, and it's definitely in the weeds on the technical parts of scoring, but it's important for thinking about how many tax cuts might be passed in this package. So one of the major points of tension in this year's reconciliation bill, particularly as it pertains to tax, is around that scoring cost we've been talking about. So the main goal of this bill, as I said, is to extend the TCJA provisions that are set to expire at the end of the year. But that move is estimated to cost $4.6 trillion over 10 years, according to the Congressional Budget Office. So obviously very expensive. Now, Republican senators led by Senate Finance Committee Chair Mike Crapo have pushed for using something called a current-policy baseline to score those extensions. Like I said, it's pretty in the weeds, but the basis of it is that a current-policy baseline scores extending policy already in place as costing zero, as opposed to a current-law baseline, which scores based on what's actually written into the law. WASHINGTON, DC - SEPTEMBER 26: Sen. Mike Crapo (R-ID) arrives to the U.S. Capitol Building on ... More September 26, 2023 in Washington, DC. The U.S. Senate is working to write up separate legislation to fund the government ahead of the September 30th shutdown deadline, as legislation being drawn up by House Republicans is being stalled. (Photo by) Now, Democrats have called this method "magic math," and they aren't the only ones who are pretty skeptical of it. Quite a few Republicans in the House, such as Ways and Means Committee members David Schweikert and Lloyd Smucker, have also criticized the measure and said they're not so sure it's the right way to go about it. But for lawmakers who are attempting to balance deficit reduction, often at the demands of members of their caucus who are really worried about the deficit with this expensive tax bill, it's seen by some as the only way to make the TCJA extensions permanent, especially when other provisions that we talked about, like no tax on tips or the SALT cap, will really only increase the tally and the overall cost of this bill. David D. Stewart: So what is next for this reconciliation bill? Cady Stanton: So the House and Senate return to the Hill the week of April 28, and that's when the different committees will start writing up the actual bill text. The budget resolution gives committees until May 9, but it's not really a binding deadline. House Speaker Mike Johnson wants to move fast, and he wants to have a bill to the president's desk by Memorial Day. Now, plenty of people will tell you that this is possibly a bit optimistic. For context, we can look back to 2017, when Congress also used the reconciliation process to pass the TCJA. All told, it took about two months after the budget resolution was passed to get the TCJA signed into law. Now, one thing that could throw a wrench into this timeline is if Republican leaders want to use the reconciliation process to also raise the debt ceiling. Right now, the government is expected to run out of money in August or September, if Congress doesn't act before then, but as this year's tax revenue comes in, that date could change. And if it comes earlier, it may pressure lawmakers to move even faster on this bill. Of course, they could also just deal with the debt ceiling in a separate piece of legislation. David D. Stewart: What hurdles are we expecting to getting final passage of this reconciliation bill? Cady Stanton: So there's obviously a lot of obstacles that could come up between now and when they finally pass the bill, but I can focus on three pretty big ones right here. The first one is having to do with energy. So one possible pay-for would be either a partial or a complete rollback of the clean energy credits from the Inflation Reduction Act. Some members of the Republican caucus, like Congressman Chip Roy has said he wants a full rescission of those credits. WASHINGTON, DC - NOVEMBER 29: Rep. Chip Roy (R-TX) speaks during a news conference with members of ... More the House Freedom Caucus at the U.S. Capitol November 29, 2023 in Washington, DC. The members of the House Freedom Caucus and a few Republican Senators discussed federal spending and the need for stronger border security. (Photo by) But a number of Republicans in states that benefited from IRA investments are cautioning against using a sledgehammer against the IRA rather than a scalpel. A group of senators and a group of House members have respectively written to the leaders of their caucus cautioning against that full repeal because of the impact in their districts should that happen. There's also a question of how much revenue a full or partial rescission would bring in reality, given that the bill became law more than two years ago, and estimates vary on how much money that might bring in. A second area to focus in on has to do with Medicaid. So as Katie mentioned, the budget resolution includes pretty specific instructions for spending cuts, and among them is $880 billion in cuts to be made by the House Energy and Commerce Committee. Given the budget that that committee has, a big chunk of it is Medicare and Medicaid, and Republicans really don't want to touch Medicare — it near guarantees there's going to have to be some cuts to Medicaid. Moderates are pretty upset about this requirement, and even withheld their vote briefly over it. We watched the floor during the budget resolution debate, and there were some centrist members who went up to Mike Johnson and tried to really get some reassurances from him on a limit to those Medicaid cuts, or even no Medicaid cuts at all. So that's definitely something to watch because it impacts a lot of especially low- to middle-income constituents of these moderate members. Now the third area is the SALT cap, and this is something I've found comes up with just about any tax bill that we discuss. This year, I think as Katie mentioned, the House has very thin margins for all of these votes, and what that basically means is any small group can attempt to leverage their numbers to get what they want on this bill. That includes members of the state and local tax, or SALT, caucus. Now, Ways and Means Committee Chair Jason Smith and others have acknowledged that because of those numbers, raising the SALT cap is now a near guarantee. It would be otherwise pretty much impossible to pass the bill without their votes. The tricky part here is how high that new cap could be. A $25,000 cap has been floated recently, but members of the SALT Caucus have shot that down pretty quickly, and a separate proposal would put a cap on the corporate SALT deductions — some people refer to it as C-SALT — as a pay-for for SALT or for other provisions, but that idea has also received a pretty chilly reception. So basically what to watch for is there will likely be a change in the SALT cap, but what that new number might look like is pretty up in the air right now. David D. Stewart: Now, one of the issues that's been dominating politics lately has been the issue of tariffs. What are we hearing from Congress on them? Katie Lobosco: Yes. We've all heard a lot about tariffs lately, and there are some Republicans that have pushed back on the president's tariffs. Chuck Grassley and six other Republican senators, along with Don Bacon of Nebraska in the House, have introduced bipartisan bills that would rein in the president's authority when it comes to tariffs. This bill would require the White House to notify Congress and justify the tariffs, and unless Congress passes a joint resolution approving them, they would expire after 60 days. And Senator Rand Paul, a Kentucky Republican, is another one who's voiced some opposition. He joined a group of Democrats introducing a bill that would repeal Trump's 10 percent across-the-board tariffs. But there's been no real indication that either of these bills would end up passing either chamber. These tariffs may come up later as we get a full reconciliation package. Now, they won't be included in the bill, but I could see some Republican lawmakers pointing to the revenue from the tariffs as an offset for government spending — some of these members that are really concerned about the deficit. But I think it's worth noting that the official score of the package will not consider the tariffs because they came from the executive branch. David D. Stewart: One other issue I want to touch on: the potential expansion of existing credits like the child tax credit and the earned income tax credit in the Senate. What's happening there? Cady Stanton: I think that's going to be one of the most interesting debates — specifically on the child tax credit — this year. So just for some context, the child tax credit was doubled from $1,000 to $2,000 in the Tax Cuts and Jobs Act, but that provision is set to expire at the end of the year. Now, CTC expansion historically has received bipartisan support. Democrats expanded it to the highest level it's ever been in the American Rescue Plan Act, though that eventually phased back. And a bipartisan bill last year that we covered extensively that passed the House but stalled in the Senate included CTC expansion alongside retroactive restoration of expired business provisions from the TCJA. So those were paired together. Now, there's debate over how to expand the CTC within the Republican caucus. So some have pushed, for example, for some enhanced work requirements for the credit or raising the qualified income level. There's definitely going to be a lot of back-and-forth as to how to tweak the dials on the credit. The idea of CTC expansion most recently came up in the past week or two, when Senator Chuck Grassley, who's on the Senate Finance Committee, said that one of the proposals Republicans are considering is raising the top marginal income tax rate to pre-TCJA levels as an offset to CTC expansion. Now, we should be really clear here that many Republicans have objected to the idea of changing that rate for the highest earners, but Senator Grassley discussing this shows that CTC expansion and how to pay for it is going to be part of discussions in the coming weeks and months. Now, turning to the earned income tax credit, which you also mentioned, I feel like that's a different ballgame here. Changes to that might be a little less likely. I wrote a few weeks back about how advocates both for expansion of the EITC or for pared-back reform of the credit have both been pushing for legislative change for many years, and really upped that push a few weeks ago ahead of the 50th anniversary of the credit. But unfortunately, there's really little to no appetite in Congress for a real full overhaul as both groups have been pushing for. So we may see some modest changes to the EITC, but the primary focus in terms of reform to those two credits will likely be on the child tax credit. David D. Stewart: Well, I guess the one thing that we can be sure of is you're going to have a lot to do over the next few months, and I thank you so much for helping us understand all that's gone on so far. Cady, Katie, thank you for being here. Cady Stanton: Thanks so much for having us. Katie Lobosco: Thank you.
