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The House voted to overturn tariffs on Canadian products, the president further dampened prospects for a second reconciliation package, Congress overruled D.C.’s plan to decouple from many tax provisions in the One Big Beautiful Bill Act, congressional budgetary experts forecast a bigger debt increase from the GOP tax bill and Democrats failed in an attempt to repeal interim corporate AMT guidance.
Here's a look at the latest tax and economic policy events in Washington.
Trump pledges veto to House’s Canada tariffs rebuke
After significant political maneuvering, the House of Representatives passed a resolution aimed at ending the Trump administration’s tariffs on Canadian products, by a vote of 219-211.
Six Republicans joined Democrats in supporting the resolution, despite intense opposition from House Republican leadership and the White House. The resolution, which would end the national emergency declared by the administration last spring to impose tariffs on Canadian products — over claims that Canada had not done enough to combat the flow of fentanyl into the U.S. — passed the House on Feb. 11.
If signed into law, the resolution would end the current 35% tariff on Canadian products not covered by the U.S.-Mexico-Canada free trade agreement. However, President Trump has said he would veto any attempt to overturn his tariffs, and even if the Senate passes the resolution, Congress appears unlikely to muster the two-thirds supermajority needed to override a veto.
It is not yet clear when the resolution could receive consideration in the Senate. Similar resolutions to end the tariffs on Canadian products passed the Senate, narrowly, on a bipartisan basis in April and October 2025, but have not yet received consideration in the House. House Republican leadership used procedural measures through the end of January to block consideration of any legislation that would overturn the tariffs, but three Republicans joined Democrats on Feb. 10 to oppose the extension of a moratorium on such votes.
In a social media post on Feb. 11, Trump said he would support challengers to any Republicans who vote to overturn the tariffs he has imposed over the last year.
“Any Republican, in the House or the Senate, that votes against TARIFFS will seriously suffer the consequences come Election time, and that includes Primaries!” Trump threatened.
House Democrats are expected to advance similar resolutions to end the Trump administration’s tariffs on Mexican imports, and potentially those from Brazil and other nations.
Grant Thornton insight:
While it is improbable that any tariff resolutions will garner enough Republicans to overcome a veto, Democrats are likely to use votes on the administration’s tariffs to tie congressional Republicans, and the White House, to widespread affordability concerns as November’s midterm elections approach.
More congressional Republicans than the six who voted against the tariffs on Canadian products have indicated they are not fully supportive of the current tariff policy and the impact on their constituents but are not yet comfortable voting against the president’s tariffs, due to how important Trump views them to his economic policy.
Trump throws cold water on second reconciliation package
In addition to doubling down on his administration’s tariff strategy, Trump recently cast doubt on the possibility of a second Republican revenue and spending package this year using the partisan budget reconciliation process used for last year’s big tax bill.
“In theory we’ve gotten everything passed that we need,” Trump said in an interview televised on Feb. 10. “Now we just need to manage it. But we’ve gotten everything passed that we need for four years,” he added, referring to the legislation known as the One Big Beautiful Bill Act (OBBBA).
Grant Thornton insight:
The health policy fight that led to this past fall’s shutdown — around extending a temporarily enhanced version of the health insurance premium tax credit for Affordable Care Act plans — drove House Republicans to discuss a second budget reconciliation package with a healthcare focus, similar to an effort that nearly became law in 2017. Separately, some House conservatives say they voted in favor of the OBBBA on the promise that they would have the opportunity to vote for more spending cuts and other deficit-narrowing measures in a second reconciliation package.
However, the effort has struggled to gather much steam, as there is no “must-pass” policy to drive a package, as there was with the expiring tax provisions last year. Many congressional Republicans — including House Ways and Means Committee Chair Jason Smith, R-Mo. — have remained lukewarm to the idea. White House buy-in has been viewed as critical for a second reconciliation package to have a chance at becoming law, and Trump’s remarks put a significant political brake on that effort moving forward.
Congress votes to overrule D.C.’s decoupling from OBBBA
A congressional effort to reverse a Washington, D.C., local tax law on conformity to the federal provisions of the One Big Beautiful Bill Act (OBBBA) has set off a dispute between the federal legislature and the district over both substance and process.
Republicans this month passed, in both the House and the Senate, a resolution to make D.C.’s tax code conform with changes made under the GOP’s 2025 signature economic legislation. The resolution nullifies a district law passed by D.C.’s city council in December, B26-0458, to decouple D.C.’s tax code from numerous changes made by the OBBBA, including bonus depreciation for qualified production property, full expensing for research costs, and new personal deductions for tip and overtime pay. No Democrats voted in favor of the resolution.
D.C. Chief Financial Officer Glen Lee argued that requiring D.C. to conform to all the OBBBA tax provisions would force filing deadline extensions that could lead to a $400 million shortfall for the city in FY2026, due to the timing shift of payments.
Grant Thornton insight:
Repeal of D.C.’s law decoupling from some of the tax provisions could have wide-ranging fiscal effects in the district. Requiring full conformity could result in a budgetary gap that may lead to a combination of cuts to services and substantial tax rate increases. With D.C. currently accepting 2025 income tax returns based on the city’s enacted provision, congressional disapproval means changes to D.C.’s tax forms and internal processes. These changes would result in delays to D.C.’s tax filing season and require some taxpayers who already filed D.C. income tax returns file superseding returns.
A dispute over a unique time window for Congress to overturn the federal district’s laws further complicates the issue. Under the Home Rule Act, Congress has oversight of the district and has 30 days (not including weekends, holidays and congressional recesses of more than three days) to review laws passed by the city before they become final. The D.C. City Council claims that the deadline for Congress to nullify its law was the day before the Feb. 12 Senate vote, allowing the city’s law to stand. Senate Republicans believe they acted in Congress’s allotted time.
Grant Thornton insight:
The difference of opinion over the deadline appears to stem from a disagreement over when the 30-day clock started, with the city counting from the date the D.C. law was transmitted to Congress (Dec. 30), and the Senate counting from the date the notification was published in the congressional record of both chambers (Jan. 7). A spokesperson for D.C.’s congressional delegate says a court has never ruled on this issue; it is currently unclear whether this will result in a legal battle.
If the review period is determined to have expired before the Senate vote, Congress could still revisit the district’s law and repeal it, but this would require legislation though the standard process. Such a bill would be subject to the filibuster in the Senate rather than able to pass with only a simple majority.
CBO raises projection of OBBBA deficit impact
The Congressional Budget Office (CBO) has released its latest 10-year budget and economic outlook and projects that last year’s GOP tax bill will add more to the federal deficit than the scorekeeper originally estimated.
Following passage of the legislation known as the One Big Beautiful Bill Act (OBBBA) last July, the CBO estimated (PDF - 285KB) that the bill would increase the 10-year deficit over the 2025-2034 period by $3.4 trillion, not accounting for any macroeconomic or debt-service effects. The additional interest to be paid on the debt was estimated at $718 billion, for a total increase in the 10-year deficit of $4.1 trillion.
The latest CBO update forecasts that the legislation will increase the deficit over the 2026–2035 period by $3.7 trillion and increase debt-servicing costs by $900 billion, for a total of $4.6 trillion.
In its report, the CBO noted that the OBBBA “results in higher interest rates, mainly because of stronger economic growth, modest inflationary pressure, and an increase in government borrowing attributable to the law.” The outlook also estimates that real GDP will be 0.7% higher in 2034 than in 2025 as a result of the OBBBA. This change is based on forecast increases in private investment — a result of provisions such as bonus depreciation — and the labor supply. The increase in total business fixed investment is estimated to peak in 2027.
The CBO noted that in addition to the passage of the OBBBA, major developments that contributed to changes in its 10-year forecasts were higher tariffs, estimated to reduce deficits by $3 trillion; and administrative actions related to immigration, estimated to increase deficits by $500 billion.
Democratic effort to repeal interim CAMT guidance fails
An effort by Senate Democrats to repeal the interim corporate alternative minimum tax (CAMT) guidance provided by the IRS failed on party lines, 47-51, in a Feb. 10 vote. The interim guidance (Notice 2025-28 (PDF - 166.2KB)) is seen as taxpayer-favorable. Democrats, particularly Senate Finance Committee Ranking Member Ron Wyden, D-Ore., argued that it went against the intent of the tax, which was included in the 2022 Inflation Reduction Act passed by the Democrats under then-President Joe Biden.
Had the resolution succeeded, it would have revoked that guidance and potentially complicated future CAMT rulemaking.
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