As Republicans Push for Tax Cuts, Here Are the Obstacles They Face

WASHINGTON—The pressure is mounting for Republicans in Congress. They face a critical, high-stakes few weeks ahead as they work to resolve key challenges in advancing President Donald Trump’s legislative agenda. At the top of their list is making permanent the tax cuts enacted during the president’s first term.

This promise was a cornerstone of Trump’s 2024 campaign, but bringing it to life comes with hurdles. The price tag is hefty, and Republicans in both the House of Representatives and the Senate remain divided on how to fund it, all while striving to keep the budget balanced.

“We need Congress to pass the largest tax cuts in American history,” Trump said during remarks at a White House event on March 26.

“We want one big, beautiful bill. Just put it all in that bill, and we’ll figure out a way to have it passed.”

To pass new tax cuts and advance Trump’s other agenda items, Republicans plan to use the budget reconciliation process, which will allow them to bypass the Senate 60-vote filibuster threshold and approve legislation with a simple majority vote.

In February, the Senate and House passed separate budget resolutions for fiscal year 2025 to pave the way for reconciliation legislation. A budget resolution establishes overall levels of spending, revenue, the deficit or surplus, and public debt. Now, the two chambers must agree on a concurrent budget resolution to formally kick off the reconciliation process.

However, one of the main hurdles they must address is whether Republicans can use the “current policy baseline” method to score the bill and make tax cuts permanent without adding to the deficit.

‘Budget Gimmick’

The 2017 tax cuts are set to expire at the end of 2025. The budget resolution passed by Republicans in the House on Feb. 25 authorized $4.5 trillion in tax cuts over the next decade, setting a cap on the amount that the federal government can lose in revenue. The House plan also includes $2 trillion in spending cuts to partially offset the loss.

However, Senate Republicans argue that they can use the current policy baseline approach for scoring. Under this approach, the existing tax cuts would be considered already in effect and would not be treated as new, costly legislation. This way, the extension of these cuts could be framed as a no-cost measure.

The idea, supported by GOP leaders, still needs approval from the Senate parliamentarian. It is uncertain whether the parliamentarian will allow this method in a budget reconciliation measure.

If approved, this would give Republicans more flexibility than the traditional current law baseline, which assumes that extending the expiring provisions would cost $4 trillion or more over a decade.

A recent report by the Committee for a Responsible Federal Budget states that the current policy baseline approach would “open the door to massive new borrowing.”

“It would represent a massive budget gimmick and impose huge costs on future generations,” the report reads.

Some Republicans in the House and Senate, particularly fiscal conservatives, are concerned that altering the rules could undermine fiscal discipline and worsen the already large deficit.

Spending Cuts

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Members of the House Freedom Caucus have made it clear that they will not accept a reconciliation package that fails to meet the spending cut targets outlined in the budget resolution, even if budget gimmicks are employed.

This poses a challenge for House Speaker Mike Johnson (R-La.), who cannot afford to lose the support of any members because of a thin Republican majority in the House.

On March 5, members of the House Freedom Caucus met with Trump at the White House to discuss the budget plan and tax agenda.

“There’s going to be a negotiation and a discussion,” Rep. Scott Perry (R-Pa.) said in response to a question from The Epoch Times after the meeting.

“There will probably be some give and take,” he said, referring to differences with Senate Republicans.

“Obviously, we have got to align with the Senate,” Rep. Chip Roy (R-Texas) said. However, he stressed that House Freedom Caucus members agree with the president, as balancing the budget remains one of their top priorities.

“To do that, we’re going to have to have the Senate work with us, get those spending restraints, and put that in combination with the tax policy necessary for the economic growth,” Roy said.

House Minority Leader Hakeem Jeffries (D-N.Y.) expressed confidence that there will be strong opposition to Medicaid cuts in the House, similar to the resistance to the 2017 effort to repeal the Affordable Care Act, President Barack Obama’s health care law.

“At the end of the day, we only need three House Republicans to do the right thing and protect the health care of their very own constituents,” Jeffries said during a news conference, in response to a question from The Epoch Times.

“There are dozens of House Republicans who know the right thing to do is to vote against this effort to jam the largest Medicaid cut in our nation’s history down the throats of the American people.”

Timeline

Another issue is the timeline for passing the reconciliation package. Johnson had initially hoped to pass the package through the House in early April and get it to Trump’s desk by Memorial Day. But for some, that timeline seems too ambitious.

After a meeting with Treasury Secretary Scott Bessent on March 25, Senate Majority Leader John Thune (R-S.D.) and Johnson expressed optimism, saying both sides are making progress in resolving their differences.

After his meeting with the Republican leaders, Bessent expressed confidence about meeting the ambitious timeline.

“I am dedicated to working with Congress in making permanent President Trump’s historic tax cuts and reviving the American dream,” he said in a statement. “Today’s productive meeting gives me confidence that a swift timeframe is achievable.”

Garrett Watson, director of policy analysis at the Tax Foundation, said he believes that there is less unity among Republicans this time than there was during the 2017 tax reform discussions.

“Arguably, this is actually a much trickier situation than 2017 because there’s less unanimity on the direction of this package,” Watson told The Epoch Times.

He noted that during the 2017 tax reform talks, leadership in both the House and Senate worked together with a clear vision, something that is less certain this time around.

“So I think that might be a place where the White House has to get more involved,” he said.

Debt Limit

Another contentious issue has been whether to include the debt limit increase in “one big, beautiful bill,” as Trump has dubbed it.

While the House blueprint included the debt ceiling increase, Senate Republicans were initially hesitant about doing so. However, the idea is now gaining support among Senate Republicans as well.

In 2023, lawmakers suspended the debt limit through Jan. 1, 2025, as part of a deal between then-President Joe Biden and then-House Speaker Kevin McCarthy (R-Calif.). That limit was reinstated at $36.1 trillion on Jan. 2. The House budget blueprint calls for increasing the debt ceiling by $4 trillion over two years.

The CBO on March 26 predicted that the U.S. government could face default risk as soon as August 2025 if Congress fails to raise the borrowing cap.

Hence, Republicans need to address this pressing issue well ahead of the so-called X-date—an estimated date when the Treasury Department’s extraordinary measures used to meet financial obligations are exhausted. The X-date could be as early as May if the government’s borrowing needs significantly exceed the CBO projections.

SALT Deduction Battle

The future of the state and local tax (SALT) deduction cap is expected to be another key topic during the negotiations. The Tax Cuts and Jobs Act of 2017 imposed a $10,000 cap on SALT deductions, which is set to expire at the end of 2025. The looming expiration has brought this tax break back into the spotlight.

Republican lawmakers from high-tax states such as New York, New Jersey, and California are advocating for an increase in the SALT deduction cap as part of the reconciliation package.

“The issue surrounding the state and local tax deduction is one of the big sticking points right now in the debate, especially in the U.S. House,” Jonathan Williams, president and chief economist of the American Legislative Exchange Council, told The Epoch Times.

Trump advisers have shown support for raising the SALT cap to $20,000 for married couples filing jointly.

This could be a potential compromise, Williams said.

Trump also reiterated his call for tax cuts for companies that manufacture in the United States, and for eliminating taxes on tips, overtime pay, and Social Security benefits.

The Committee for a Responsible Federal Budget has estimated that the cost of Trump’s other priorities could total at least $1.2 trillion over the next 10 years. This includes at least $100 billion to exempt tips from taxation, at least $250 billion to end taxes on overtime pay, at least $550 billion to lower taxes on Social Security benefits, at least $200 billion to increase the SALT deduction, and at least $100 billion to cut corporate taxes for domestic production.

Republicans aim to use the reconciliation process in 2025 not only for tax cuts, but also to reform U.S. energy policies, boost spending on border security and defense, and reduce federal spending across various areas of the budget.

Arjun Singh contributed to this report.

Original News Source Link – Epoch Times

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