Congressional Republicans are likely to move quickly to carry out President-elect Donald Trump’s top legislative priority by extending expiring tax provisions and enacting new tax cuts, and some farm bill measures could go along for the ride.
Republican leaders will be hammering out their strategy for 2025 in coming days, but they are widely expected to move forward with the budget reconciliation process as rapidly as possible after the new Congress is seated Jan. 3.
“This is all going to happen, I think very, very quickly, early next year,” said Chuck Conner, president and CEO of the National Council of Farmer Cooperatives.
The budget reconciliation process will allow Republicans to pass tax and spending cuts without any Democratic votes. That’s crucial since just extending the expiring provisions of the 2017 Tax Cuts and Jobs Act is estimated to cost $5 trillion over 10 years and Trump has proposed additional cuts, including exemptions on tips and Social Security income.
The expiring TCJA provisions include reduced personal income tax rates, a 20% deduction for small business income, and a doubling of the estate tax exemption. A bonus depreciation provision widely used by farmers is set to phase out by 2027.
Reconciliation bills can pass the Senate on a simple majority vote, bypassing the 60-vote threshold for other legislation. Republicans will have two chances next year to move reconciliation bills, one for fiscal 2025, which started last month, and the other for FY26, which begins next Oct. 1.
Assuming Congress doesn’t pass a new farm bill before the end of the year, a Senate aide close to the farm bill strategy says some provisions could be included in a reconciliation bill, including a cut to projected funding for the Supplemental Nutrition Assistance Program. Conservation funding provided by the Inflation Reduction Act in 2022 also could theoretically be clawed back.
The reconciliation bill also could be the vehicle for another Trump campaign pledge, an across-the-board tariff on imported products. Trump argued during the campaign that new tariffs could offset the revenue lost from new tax cuts and spending. Politico reported last week that the House Ways and Means Committee GOP staff has discussed a package of tax and tariff cuts with Trump's team. Committee aides didn't respond to a request for comment on the issue.
Bill HoaglandPassing a major reconciliation package, with or without the tariff increases included, is no slam dunk, says Bill Hoagland, a senior vice president with the Bipartisan Policy Center and longtime budget specialist for Senate Republicans.
For one thing, Republicans are likely to control the House by a razor-thin margin. As of Tuesday, The Associated Press had declared Republicans winners of 214 seats compared to 204 for the Democrats. Republicans need to win at least 218 to control the chamber.
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“It's not 2017, because in 2017 [then Speaker] Paul Ryan had a margin of nearly 40 Republican votes,” Hoagland said, referring to the year the GOP enacted the tax cuts over Democratic opposition.
In 2025, a handful of Republicans could slow down passage of a reconciliation bill if their demands aren’t met. Some Northeast Republicans, for example, are likely to demand an increase in the $10,000 cap on the income deduction for state and local taxes.
And before taking up that giant package of tax and spending cuts, the House and Senate will have to adopt a budget resolution that lays out the framework of their plans for the reconciliation bill. A budget resolution that telegraphs GOP plans to increase budget deficits by trillions of dollars could create a backlash, Hoagland cautions, citing the impact on interest rates.
“I think there's a little bit more concern about debt and deficit, maybe, than it was in 2017,” Hoagland said.
According to an analysis by the Tax Foundation, enacting Trump’s proposed tax cuts and extending the TCJA provisions would increase deficits by nearly $6 trillion over 10 years, even accounting for the revenue raised by a 20% across-the-board tariff.
Mary Burke BakerTrump’s proposals, which include cutting the corporate tax rate from 21% to 15%, are “very expensive,” but some are likely to be addressed in the reconciliation package, said Mary Burke Baker, a tax policy specialist with K&L Gates.
“We expect a lot of intra-party tension about pay-fors and adding to the deficit. Republicans do not see eye to eye on that. Some think that extensions of current policy don’t need to be paid for, and others do. And we also have the tariff issue,” she said, referring to proposed tariff increases.
Including tariff increases in reconciliation would allow the revenue to offset the cost of tax cuts. But if Trump imposes the tariff increases unilaterally, the Congressional Budget Office wouldn’t include the expected revenue in estimating the cost of the reconciliation bill, Burke said.
However, Congress theoretically could override the CBO score and include the revenue from Trump-imposed tariffs, Hoagland said. The Tax Foundation estimates a 20% across-the-board tariff would raise $3.8 trillion over 10 years.
Ron Baumgarten, an international trade policy specialist with BakerHostetler who served as deputy assistant U.S. trade representative during the first Trump administration, said Trump already has fairly broad authority to unilaterally impose tariffs under the International Emergency Economic Powers Act.
“The sky seems to be the limit on that. It could be challenged in court, but courts don't like to step in on national security and foreign policy issues,” Baumgarten said.
Conner expresses confidence Republicans ultimately will agree that the costs of extending TCJA policies don’t need to be offset, which is the position of the incoming Senate Finance Committee chairman, Mike Crapo of Idaho.
“I think fundamentally, the tax bill is going to happen because … Republicans in Congress will make the case that this has been the law of the land for seven years, and we're going to continue along these lines,” Conner said.
Wyoming Sen. John Barrasso, a member of the Senate GOP leadership and the Finance Committee, which writes tax and trade legislation, says discussions between Trump’s team and Republicans on Capitol Hill have been going on since the summer on what to include in a package of tax and spending cuts.
“We’ve been working with [South Carolina Republican] Lindsey Graham – he'll be chairman of the Budget Committee in the Senate – to make sure we can accomplish as much as we possibly can to give the tax relief that the American people deserve [and] need,” Barrasso said on NBC’s Meet the Press on Sunday.
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