A guide to the big tax fight that’s consuming Washington right now
By Michael Jones
With the Senate confirming 16 of President Trump’s 23 cabinet nominees, Congress has turned its attention to enacting the president’s economic agenda, including extending his 2017 tax cuts and passing new ones.
Thanks to their unified federal government control, Republicans have deployed a wonky but powerful tool called “budget reconciliation” to score Trump’s legislative wins without Democratic support.
Reconciliation will dominate congressional politics for the next several months, so it’s worth understanding the basics so you can track where your elected officials stand and ensure their position matches your values. Below is a guide to explain it all.
WTF is reconciliation?!
Simply put, budget reconciliation allows the majority party—in this case, Republicans—to pass certain tax, spending, and debt-related legislation with a simple majority in the Senate instead of the 60-vote threshold required to bypass Democratic opposition known as a “filibuster.”
The reconciliation process was enacted in the mid-1970s to enforce budgetary discipline. However, over time, it has become a vehicle for enacting major policy changes, such as the Bush tax cuts of 2001 and 2003, the revisions to the Affordable Care Act in 2010, the aforementioned Trump tax cuts, the American Rescue Plan in 2021, and the Inflation Reduction Act a year later.
Republicans did the easy part
The first step of the reconciliation process is for Congress to pass a budget resolution to set revenue and spending targets for federal programs. The resolution can direct specific committees to draft legislation to achieve certain fiscal goals (“The Finance Committee shall produce legislation reducing the deficit by $1.5 trillion over 10 years.”), the document itself doesn’t become law or require the president’s signature.
Since the start of the process, the House and Senate have disagreed on whether to combine the border, energy, and tax provisions that comprise President Trump’s domestic agenda into one or two bills.
House GOP leadership has pushed for the single-bill strategy to ensure members only have to vote once on a bill – although that will ultimately require a herculean whip operation from Republican leaders to secure enough support. However, the thinking is that it would be virtually impossible to capture lightning in a bottle more than once and get two bills passed.
The Senate, far-right House Freedom Caucus, and top Trump administration official Stephen Miller argue the two-step plan would enable lawmakers to give Trump a quick win on border security and energy production, two issues he aggressively campaigned on and that have broad support among Hill Republicans. The party could ride that momentum to pass a second tax-focused bill later this summer or early fall.
This divergence is apparent in the separate resolutions that reflect each chamber’s strategy, which both advanced out of the House and Senate Budget Committees last week.
But advancing the resolutions out of committee may have been the easy part. House conservatives clinched a deal that would enable more tax cuts if funding for domestic programs is slashed beyond the baseline that is instructed in the current resolution, which could cost Republican leadership votes from so-called moderate Republicans whose constituents rely on that assistance.
Remember that 12 Republicans voted against the GOP’s big tax bill in 2017 (more on that below), joining all Democrats in opposition. With full attendance, Speaker Johnson currently has a zero-vote margin that could tick up to two after a couple of special elections to fill vacancies in Republican-held vacancies are held in April. In either case, this will be incredibly tight.
Meanwhile, in a closed-door meeting last week, Johnson said that if the Senate resolution passes, the House will not consider it, which could halt the upper chamber’s two-track strategy.
Nonetheless, the Senate could vote on that resolution as early as this week. The House is expected to follow suit on its resolution when it returns from recess next week.
What’s in each resolution?
The Senate budget resolution allocated $175 billion over four years to the Department of Homeland Security to complete the southern border wall, enhance surveillance technology, increase detention capacity, and expand the Border Patrol Workforce. An additional $150 billion is proposed for defense spending to expand the Navy, strengthen the defense industrial base, develop an integrated air and missile defense system, and modernize strategic nuclear forces.
Across the Capitol, House Budget Committee Republicans approved a resolution that allocates up to $4.5 trillion over the next decade to extend the 2017 Trump tax cuts. It proposes at least $1.5 trillion in funding reductions over 10 years, potentially affecting programs like Medicaid and SNAP. It designates an additional $300 billion for national defense and border security and includes a $4 trillion increase in the federal debt limit to ensure the government meets its financial obligations.
Democrats sponsored more than 30 amendments that would have blocked cuts to social programs, protected the Affordable Care Act, kept prescription drug prices from spiking, and prevented billionaires from accessing sensitive taxpayer data after Elon Musk’s government takeover. They were each rejected.
The 2017 Trump tax cuts, explained
In a column last July, I wrote about the three most dangerous outcomes Hill Democrats told me they were worried about under unified Republican control of the federal government, including Trump appointing another Supreme Court justice to entrench its conservative supermajority further, passing a nationwide abortion ban without congressional action, and extending the 2017 tax cuts that are set to expire this year.
The Tax Cuts and Jobs Act (TCJA) was the most sweeping overhaul of the U.S. tax code since the Reagan-era reforms of 1986. It significantly cut corporate tax rates, adjusted individual income tax brackets, capped key deductions, and introduced new tax provisions that affected businesses and individuals.
Republicans claim that TCJA made U.S. businesses more competitive and simplified the tax code. However, without an extension to the individual tax cuts, GOP lawmakers argue that middle-class taxpayers will see higher tax bills in 2026 when the provisions expire.
But Democrats largely opposed the TCJA, arguing that it disproportionately benefited corporations and the wealthy while increasing deficits. The effects of the corporate rate tax cut encouraged marginal business investment. Any wages and one-time bonuses companies increased or offered paled compared to the buybacks and dividend payouts. Additionally, the economic growth in the year after the tax cuts were enacted was temporary. And Democrats wonder why big corporations and wealthy Americans should receive another massive tax cut at the expense of working- and middle-class Americans and the social programs they count on to make ends meet.
Trump’s 2024 campaign promises
While cost estimates exclude potential economic growth, analysts agree that extending the 2017 tax cuts beyond the end of the year will cost between $4 trillion and $5 trillion.
This price tag is a heavy enough burden for Republican tax writers, but Trump made several tax-related campaign promises that will add to the final number.
Trump proposed ending taxes on tip income, overtime pay, and Social Security benefits to increase take-home pay for service industry workers and retirees. What is the total cost of implementing these three exemptions? $2.5 trillion to $5 trillion over the next decade.
The president also promised as a candidate to raise the $10,000 cap on the State and Local Tax (SALT) deduction, which disproportionately affects residents in high-property and -income tax states—including those won by former President Biden in 2020 and former Vice President Harris in 2024 but held by Republican House members.
According to the Tax Policy Center, doubling the SALT cap to $20,000 would increase the federal debt by $225 billion. At the same time, the Penn Wharton Budget Model estimates that eliminating it would cost more than $1.1 trillion over the next decade. (FWIW, Republicans in general have largely resisted attempts to repeal or raise the SALT cap, arguing that doing so would amount to an unnecessary tax break for the wealthy.)
Skeptics argue there’s insufficient funding to slash to pay for these expensive cuts.
What Democrats are saying
Most Hill Democrats are singing from the same political hymn sheet. Assistant House Minority Leader Joe Neguse (D-Colo.) told me Republicans should proceed with caution since inflation remains high and the economy remains the number-one issue concerning most Americans.
“The American people do not support giving tax breaks to the richest billionaires in the country and in the world. They don’t support gutting Medicaid and key programs that are assisting Americans as they grapple with the high cost-of-living under the Trump administration,” Neguse said. “So… ultimately, the American people will understand the consequences, and I think that’s also one of the reasons why [Republicans] have struggled thus far to make any legislative headway. It’s because even some members of their caucus in the House as well as in the Senate understand the real world implications of what they’re doing.”
Senate Minority Leader Chuck Schumer (D-N.Y.) described the Republican budget plan as “radical” in a floor speech last week.
“Republicans should remember well what happened the last time they cut taxes for the ultra-wealthy: it backfired with the rest of America,” he said. “If Republicans try to cut taxes for the ultra-rich again, history is going to repeat itself and it will cost them dearly at the ballot box.”
What’s next?
Before Senate Republicans can pass their resolution, there will be 50 hours of formal debate before the Senate moves into an endless amendment marathon, known as a “vote-a-rama,” where any senator can introduce an amendment.
Democrats are expected to introduce controversial amendments to force Republicans to take tough votes from which a majority leader would ordinarily shield his vulnerable members.
There is no time limit for vote-a-rama, so it will continue until all amendments are considered.
If the resolution passes, the committees that received reconciliation instructions will draft legislative text, which will then be combined into a single bill and considered by the full House and Senate, including another vote-a-rama.
In other words, Republicans have a long way to go.
Michael Jones is an independent Capitol Hill correspondent and contributor for COURIER. He is the author of Once Upon a Hill, a newsletter about Congressional politics.
