House approves Senate budget resolution

On April 10, 2025, the House of Representatives passed the Senate’s updated budget resolution by a 216-214 vote, bringing Republicans closer to enacting tax reform and other components of the president’s agenda. The Senate’s budget calls for use of the highly unconventional “current policy” baseline. As discussed in our March and April Policy Pulses, this baseline assumes that the Tax Cuts and Jobs Act (TCJA) provisions, which are set to expire on Dec. 31, 2025, will be extended in accordance with the current policy, and as such, these extensions will have no associated cost. This in effect would allow for the expiring TCJA provisions to be made permanent by any eventual tax legislation.

In addition to accommodating the potential for TCJA permanence, the Senate blueprint allows for another $1.5 trillion in tax cuts. These cuts are anticipated to pave the way for enacting some combination of the president’s priorities, which were part of his campaign and continue to be advocated for, including exempting tip, overtime and social security income from income tax, and a reduction of the corporate tax rate for domestic manufacturers. Separately, this instruction may cover an increase of the state and local tax (SALT) deduction cap from $10,000, which the bipartisan SALT caucus has demanded in exchange for votes needed to pass any ultimate legislation. The Senate budget includes what the upper chamber’s leadership maintains is a “floor” of $4 billion in spending cuts, and a $5 trillion increase to the government’s borrowing limit.

While this is indeed a critical step forward toward potential tax reform, the fact remains that significant differences between the Senate’s and House of Representatives’ budget plans must be resolved. For instance, the blueprint initially passed by the House only allows for $4.5 trillion in tax cuts over a 10-year period and uses the “current law” baseline (which would not allow for the expiring TCJA provisions to be made permanent), includes $1.5 trillion in required spending cuts, and would increase the federal debt limit by $4 trillion. The largest gap to bridge is the difference in the chambers’ respective cuts—mandatory $1.5 trillion in the House versus $4 billion in the Senate. In exchange for ‘yea’ votes from several House fiscal hawks whose holdout status delayed an initially scheduled April 9 vote, House Speaker Mike Johnson (R-LA) promised that any ultimate reconciliation bill would reflect the House’s significantly steeper level of spending cuts. As evidenced by the razor thin margin by which the Senate budget passed the lower chamber, it would appear that adhering to these promises will be essential for any eventual bill to pass. However, achieving these savings as instructed by the House plan may require cuts to Medicaid, which has created consternation within the party, presenting one of many difficult needles to thread in crafting legislation.

It is important to note that the budget only instructs Congressional committees to account for certain levels of spending or savings and does not itself contain any tax provisions. Lawmakers’ next steps are to begin writing the reconciliation bill that presumably will include tax reform, as well as Republican energy, defense and border security priorities. House Speaker Johnson and Ways and Means Chair Jason Smith (R-MO) intend to have the bill on the president’s desk for signature by the Memorial Day holiday, however, Senate leadership anticipates it could push further into the summer.

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