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House and Senate Republican Leaders Align on Reconciliation: Senate Majority Leader John Thune (R-SD) and House Speaker Mike Johnson (R-LA) agreed on key policy toplines for a compromise budget resolution following a meeting at the White House on Tuesday with Trump administration officials. Both leaders stated that they would attempt to advance a single budget resolution before the Easter recess. While no text has been released, Thune noted Wednesday that the Senate may begin voting on a budget resolution as soon as next week, while House Majority Leader Steve Scalise (R-LA) said that agreeing on changes to the House budget resolution could delay the timeline. Leader Thune also noted that he hopes to include a debt limit hike in the budget resolution, consistent with the budget resolution that passed the House earlier this month. On Wednesday, the Congressional Budget Office (CBO) released a report concerning the statutory debt limit, where it estimated that if the debt limit remains unchanged, the federal government may default on its debt obligations in August or September 2025.
Crapo, Senate Republicans Continue to Advocate for Use of ‘Current Policy’ Baseline: At a U.S. Chamber of Commerce tax policy summit on March 12, Senate Finance Committee Chairman Mike Crapo (R-ID) advocated for the usage of a current-policy baseline in assessing the budgetary effects of extending the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97) and other tax priorities of the Trump administration. If permitted by the Senate parliamentarian, the current-policy baseline would allow Congress to make the expiring TCJA tax provisions permanent, with no apparent cost even though as a practical matter they still would be deficit financed. He contended that utilizing the current-policy baseline would allow Congress and the Trump administration to enact more sweeping tax-reform measures and give rise to greater permanence of the tax code, which would help businesses in their tax-planning initiatives.
Ways and Means Committee Begins Reviewing IRS Energy-Tax Credits: Prior to the congressional recess, House Ways and Means Committee Republicans held two closed-door sessions to begin reviewing the major components of the tax reconciliation bill, including the energy tax incentives enacted as part of the Inflation Reduction Act (IRA, Pub. L. 117-169). Although specific details were not released, reports indicate that while some favor a complete repeal of the IRA, an increasing number of Republicans favor taking a credit-by-credit approach and using a scalpel to extract revenue savings while preserving the policy merits of individual credits. Committee members are reported to have weighed in favor of particular credits, including the Section 45Q Carbon Oxide Sequestration Credit, the Section 45Z tech-neutral Clean Fuel Production Credit, and the Section 45X Advanced Manufacturing Production Credit. Additional closed-door sessions are expected in the coming weeks, with Ways and Means Committee Chairman Jason Smith (R-MO) expecting to mark up the committee’s tax title to the reconciliation bill prior to Memorial Day (May 26).
Initial Estimates Suggest Tax Revenue Could Decrease by 10%: Internal sources from the Treasury Department and Internal Revenue Service (IRS) have predicted that the IRS would see a decrease in tax revenue for the 2025 tax-filing season by more than 10% by the April 15 deadline, compared to 2024, as first reported by The Washington Post. Officials said that efforts by the Trump administration to reduce the IRS workforce directly correlated with this prediction, due to the firings of employees, the reduced likelihood of audits and investigations of wealthy taxpayers and large corporations, and a potential increase in noncompliance by immigrants illegally residing in the United States who normally pay taxes. Other factors may be in play that would allow the IRS to recoup some of this lost revenue, including the potential increased use of penalty-free filing extensions by taxpayers, especially those affected by natural disasters. Nevertheless, the predicted decrease in revenue will tighten funds for Trump administration initiatives and may lead to increased borrowing to fund government operations.
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