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Republicans working on budget agreement with reconciliation instructions for tax reform

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Republicans working on budget agreement with reconciliation instructions for tax reformRepublicans are struggling to move forward on a budget resolution that would allow them to create reconciliation instructions to ease the passage of tax reform.

The House Budget Committee has twice postponed a markup on a budget and has yet to release a draft version. A budget is considered critical to the tax reform process because Republicans enjoy only a 52-seat majority in the Senate, well short of the 60 needed to overcome a filibuster. Reconciliation allows legislation to pass the Senate with simple majority votes, but that process comes with restrictions.

Reconciliation instructions can only be created by a budget resolution, and Republicans are facing challenges in crafting a resolution that satisfies the competing factions in their party. Conservatives are fighting for deep cuts to mandatory spending that many moderates oppose.

There is less disagreement over the reconciliation instructions for tax reform, and Republicans do have options. Leadership has repeatedly expressed commitment to revenue-neutral tax reform, but reconciliation instructions can provide for revenue losses within the budget window if lawmakers choose. Tax reform would still need to be revenue neutral outside the budget window, but Republicans could seek to extend the budget window beyond 10 years and simply sunset their bill like the 2001 and 2003 tax cuts.

Republicans still have plenty of time to resolve their differences and get a budget done. A new budget generally supersedes any previous versions, so lawmakers won’t want to pass a new budget until they use the previous budget’s reconciliation instructions on their healthcare bill. Those reconciliation instructions do not expire until the end of September. Senate Majority Leader Mitch McConnell, R-Ky., is postponing the start of the August recess to try to finish the healthcare bill, though its fate is far from certain.

Top Republicans in the House and Senate are continuing to meet with key administration officials to try to agree on a unified plan for tax reform. The current goal is to release a bill in September after lawmakers return from the August recess.

Contact:
Dustin Stamper
Director, Washington National Tax Office
T +1 202 861 4144

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