Republicans Plot Speedy Tax Bill Passage as Election Nears

Top Republicans are laying the groundwork to craft a tax package that can be enacted quickly if they win control of Congress and the White House in November’s elections.

With around half of the House GOP conference new to the chamber since passage of the 2017 tax law, Republicans are educating lawmakers about the budget reconciliation process—which both Democrats and Republicans have used to pass high-profile legislation largely along party lines.

Reconciliation allows the passage of tax and spending changes with simple majorities in both chambers, averting the need for 60 votes in the Senate. It’s not an easy endeavor, though. There are limits on the types of policy changes that can be made and party infighting can pose challenges to advancing legislation through the process.

Republicans used reconciliation to pass the 2017 tax law—which cut tax rates for individual and business income—without Democratic support. The GOP has since watched Democrats use the process to pass a 2021 pandemic aid package as well as the 2022 tax-and-climate law that boosted clean energy incentives and provided tens of billions of dollars to the IRS.

GOP leadership thinks the party didn’t take full advantage of the reconciliation tool the last time it controlled the White House and both chambers of Congress, and wants to more extensively use the process if former President Donald Trump returns to the Oval Office, said Rep. Kevin Hern (R-Okla.).

“With reconciliation, it is everything that you ever wished to do and every 8 to 10 years you get to do it, when you have the House, the White House and the Senate,” Hern told reporters recently.

Wish Lists

House Majority Leader Steve Scalise (R-La.) has been making the rounds in settings like a recent Republican Study Committee lunch, which Hern chairs. Scalise has also asked committee chairs to put together wish lists of priorities that fit within reconciliation rules. Tax and the border are on the list, Hern said.

Tax legislation is likely to be a priority for Congress in 2025 regardless of the outcome of the elections, since most of the 2017 law’s individual provisions expire at the end of next year. But the contours of a tax package will vary significantly depending on the election results.

Currently, Democrats narrowly control the Senate and Republicans narrowly control the House. Democrats are likely to lose at least one Senate seat, in West Virginia, and several Democratic senators face reelection in races rated as toss-ups by the nonpartisan Cook Political Report.

In the House, Republicans are currently favored in 210 races and Democrats are favored in 203, with the rest rated by the Cook Political Report as tossups. A party needs 218 seats to have the majority.

House Republicans say they aren’t waiting for the election to be over to prep for possible control of Washington, which means nailing down what a reconciliation package might look like, according to Scalise’s office.

They’re also consulting with business and other outside groups as they plot a way forward.

Education Gap

With so many new House Republicans, it’s important for the GOP to start discussions now, said Jen Acuña, a principal at KPMG’s Federal Legislative & Regulatory Services group and former GOP chief tax counsel for the Senate Finance Committee.

She pointed to the 10 tax teams House Ways and Means Committee Chair Jason Smith (R-Mo.) launched earlier this spring to get the GOP tax writers ready for the reconciliation process. The teams cover topics including international, family, and manufacturing tax issues.

“There’s a significant education gap,” Acuña said. “That’s why they have the tax teams put together to start ramping up that tax education and policy discussions that need to take place.”

Reconciliation, a procedure dating back to the 1970s is a two-stage process. First, the House and Senate needs to adopt a budget resolution that includes reconciliation instructions directing appropriate committees to develop legislation to achieve the desired budgetary outcomes. That legislation is then considered under expedited procedures in the House and Senate, which circumvents the Senate’s 60-vote filibuster threshold.

Former Ways and Means Chair Kevin Brady (R-Texas), one of the authors of the 2017 tax law, spoke at the GOP’s retreat earlier this year about reconciliation.

“The biggest challenge early on was reconciliation,” Brady said in an interview. “There were plenty of fits and starts.”

Obstacles

There are several areas where Republicans could run into obstacles using reconciliation.

Lawmakers in the budget resolution would need to set parameters for how much a tax package can add to the deficit over the budget window. Republicans are divided over how much of a tax package they want to offset.

Once Republicans get to crafting the tax package itself, if there is a razor-thin majority in the Senate, individual lawmakers have more power to try and get their priorities, in exchange for their support, said Todd Metcalf, a former chief tax counsel for Senate Finance Committee Democrats who is now a principal for tax policy services at PricewaterhouseCoopers.

For example, when the 2017 tax law was moving through Congress, Sens. Ron Johnson (R-Wis.) and Steve Daines (R-Mont.) had both threatened to vote against the measure until its deduction for pass-through business income was made more generous.

There are also policy restrictions on the process, like the so-called Byrd Rule that is enforced in the Senate, which could mean big changes to legislation if lawmakers don’t properly vet the bill ahead of time. Under the Byrd Rule, reconciliation legislation can’t increase the deficit outside of the budget window, traditionally a 10-year period, which is why much of the 2017 tax law expires at the end of 2025. The Byrd Rule also blocks provisions that are unrelated to revenues and spending from being included in reconciliation bills.

It’s valuable for lawmakers to start getting educated on reconciliation now so that they have the time to get an understanding of the process and the size and scope of potential legislation, Metcalf said.

That’s especially true if lawmakers want to meet the goal floated by lawmakers like Smith, who said he’d like to see a tax package passed in the early part of next year.

“Reconciliation avoids the need to compromise with the other party, but it also puts handcuffs in many ways on what you can do,” said Metcalf.