UNITED STATES – MAY 24: Rep. Jodey Arrington, R-Texas, during a House Budget Committee hearing. … [+]
The House Budget Committee is scheduled to consider a fiscal framework largely developed by House Speaker Mike Johnson (R-LA). It would make room for a net of about $4.5 trillion in tax cuts over the next 10 years, along with at least $1.5 trillion in spending reductions.
But the House GOP’s efforts to draft “one big beautiful bill” would fall far short of the cost of President Trump’s ambitious revenue goals—making the expiring provisions of the Tax Cuts and Jobs Act (TCJA) permanent and enacting the additional tax cuts Trump has proposed.
A $4.5 trillion tax cut limit sounds ambitious. But it still would leave House Republicans with painful choices. Extending the expiring provisions of the TCJA alone will cost in excess of $4 trillion over the next decade. Adding other tax cuts proposed by President Trump in his 2024 campaign, including tax-free tips, overtime, and Social Security benefits could boost the price tag to between $5 trillion and $11 trillion, according to the Committee for a Responsible Federal Budget.
Hard Choices
Stuffing a proverbial 4.5-pound bag with as much as 11 pounds of sugar won’t be easy. House Republicans could extend the TCJA only temporarily, say for five years; phase in Trump’s tax cuts over time or scale them back; include some otherwise controversial revenue increases to offset some tax cuts; or find more spending cuts.
Another option: They could rely on fiscal legerdemain to make that $4.5 trillion appear to go a lot farther than it really does. They could claim that tax cuts would largely pay for themselves, despite analysis by the Tax Policy Center and others that concludes that extending the TCJA would fall far short. Or they could assume it would cost nothing to extend the TCJA since it would only be continuing current law.
The fate of this draft budget is highly uncertain. House Budget Committee Chair Jodey Arrington (R-TX) wants to cut more spending. House Ways & Means Committee Chair Jason Smith (R-MO) prefers more tax cuts.
The House Freedom Caucus wants to make the TCJA permanent, even if it means slow rolling some of the Trump tax cuts, including his plan for tax-free tips. And a group of moderate House Republicans from high-tax states is insisting on raising the cap on the state and local tax (SALT) deduction. Increasing the SALT cap from $10,000 to $20,000 for joint filers would itself cut taxes by about $225 billion over 10 years, according to a recent Tax Policy Center analysis.
On the other side of Capitol Hill, Senate Republicans are moving on their own two-bill strategy, which would delay any significant tax cuts or consideration of the TCJA until much later this year.
Congressional Republicans are finding that taking even the first steps towards achieving Trump’s ambitious agenda are not easy.