House and Senate advance competing budget instructions for tax reform

House and Senate Republicans advanced budget resolutions last week that include reconciliation procedures that would pave the way for tax reform later this year.

The House approved its budget resolution on 219 – 206 vote. The Senate Budget Committee approved its resolution and vote on the Senate floor is expected this week. Both resolutions include reconciliation instructions for tax reform, though the House version is much less generous.

Reconciliation is seen as key to tax reform passed because it would allow Republicans to bypass 60-vote procedural hurdles in the Senate and approve a bill with a simple majority vote. The process does come with instructions. For one, the revenue requirements must be determined up front in the instructions themselves.

The House resolution provides a deficit neutral reserve fund for tax reform and its reconciliation instructions do not allow for any revenue loss. In fact, the reconciliation instructions actually require the Ways and Means Committee to raise $52 billion. The Senate resolution would allow a revenue loss of up to $1.5 trillion.

The House and Senate must agree on a unified budget resolution before the reconciliation instructions are effective. Key Republican leaders and taxwriters are pushing for the Senate version because it provides much more flexibility. But even under the Senate resolution, revenue loss would only be permitted within the budget window. Reconciliation bills cannot lose money outside of the 10-year budget window.

Lawmakers have talked about sunsetting certain tax provisions to keep the bill revenue neutral outside of 10 years. Lawmakers could also seek to extend the budget window as part of the resolution, but neither version includes such a change.

House Ways and Means Committee Chair Kevin Brady, R-Texas, is waiting for the final budget agreement to pass before he officially introduces and marks up a tax reform bill. He is nonetheless touting an aggressive timeline and is hoping to enact final legislation before the end of the year.

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

Shamik Trivedi
Senior Manager, Washington National Tax Office
T +1 202 521 1511

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