After hours of consideration, the House Budget Committee passed a budget resolution on Thursday night that would allow Republicans to begin the process of legislating a massive major fiscal overhaul that includes tax cuts.
The Budget Committee voted 21-16 to pass the resolution after a marathon markup that stretched 12 hours. Republicans were threading a needle with the resolution, given some Republican lawmakers’ demands for deeper spending cuts and concerns from some centrist members about the depth of cuts to major programs like Medicaid.
The House GOP is in a tricky spot because the party can’t afford to lose votes on the resolution, given the slim majority in the lower chamber. The difficulty advancing the budget blueprint is a preview for what will likely be months of wheeling and dealing during reconciliation, a legislative process that allows for bills to bypass the filibuster and pass with only a simple majority in the Senate.
As passed out of committee, the budget resolution includes a $1.5 trillion floor for spending cuts with a target of $2 trillion in spending cuts and would allocate $4.5 trillion on the deficit cap for the House Ways and Means Committee, which will be tasked with extending the 2017 Tax Cuts and Jobs Act and tacking on new tax cut provisions that were promised by President Donald Trump.
It additionally increases the debt ceiling by $4 trillion.
“This budget resolution is more than numbers on a ledger, it’s a blueprint for restoring America’s security, prosperity, and leadership in the world,” Budget Committee Chairman Jodey Arrington (R-TX) said during his opening remarks. “It’s a promissory note for our children to preserve the land of liberty and opportunity by safeguarding it from an unwieldy government and the unbridled spending, taxing, and regulating that threatens to destroy it.”
A key amendment that was passed allows Arrington to increase the cap on the deficit hit from the tax provisions if offsetting spending cuts are made elsewhere.
Earlier in the day on Thursday, Rep. Andy Harris (R-MD), chairman of the hard-line Freedom Caucus, said the caucus would vote for the resolution with those conditions included. The Freedom Caucus has been pushing for deeper spending cuts and warning about debts and deficits.
The budget document is a resolution. It would not go to the president or directly change federal spending or taxation. But its adoption by the House would unlock the reconciliation process. That will allow the Ways and Means Committee, led by Chairman Jason Smith (R-MO), to write tax legislation in order to fit within the deficit ceiling provided by budget resolution.
The biggest chunk will be extending the TCJA, but Trump proposed several new and major tax changes while campaigning. Now the Ways and Means Committee needs to figure out how best to include the White House’s tax priorities without breaching the deficit cap.
The extra priorities the White House has outlined include eliminating taxes on tips, ending taxes on Social Security, eliminating taxes on overtime pay, adjusting the cap on state and local tax deductions, and introducing tax cuts for made-in-America products.
Those all add to the deficit, perhaps by massive amounts, depending on how the individual provisions are actually structured.
Adjusting the state and local tax deduction cap alone could lower revenues between $200 billion and $1.2 trillion alone, according to the Committee for a Responsible Federal Budget, meaning that it could not be fit into the $4.5 trillion total allowance. Cutting taxes on tips might cost the Treasury between $100 billion and $550 billion, and cutting taxes on Social Security could add up to $1.5 trillion more.
But the lengthy hearing was also an opportunity for lawmakers to message and rail for and against individual tax provisions more generally. Throughout the markup, Democrats branded the TCJA as a giveaway to the very wealthy.
Several Democrats introduced amendments, which, given their place in the minority, were doomed to fail. Rep. Pramila Jayapal (D-WA) introduced an amendment that called for raising taxes on the nation’s wealthiest.
Rep. Blake Moore (R-UT), a member of both the Budget Committee and sits on Ways and Means, pushed back on those assertions from Democrats. He pointed out that in 2017, Republicans capped the deduction on state and local taxes — a tax break that largely benefits the wealthy.
“This is not a tax cut to the billionaires,” Moore said of the Trump tax cuts.
But the budget resolution passing on Thursday is a win for Republicans who want to see reconciliation be done with one bill rather than separating it into two bills: one for priorities such as immigration and the military and the other being solely focused on taxes.
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Notably, given gridlock in the House over the budget resolution, the Senate this week also marked up its own budget for energy, border security, and defense policy. Senate Budget Committee Chairman Lindsey Graham (R-SC) is working toward a two-bill strategy but indicated he’d be open to one large bill if the House was successful.
“We’ll see what happens the House,” Graham told reporters on Wednesday. “If they can do one big, beautiful deal I am all for it. I prefer it, and I hope it happens.”