The House Budget Committee late on July 19, 2017, approved by a 22-14 vote a fiscal year 2018 budget resolution. The resolution includes reconciliation instructions both for tax reform legislation and for deficit reduction. The instructions call for $203 billion in deficit reduction over 10 years based on recommendations from 11 committees, including Ways and Means.

Committee approval had been expected, so the focus is now on the full House because of widespread speculation that there is insufficient support to pass the resolution. Chairman Diane Black (R-TN) acknowledged on Tuesday that "we will be working [with] all of the members and making sure that they understand the significance and importance about what we have put in this document" as it moves to the floor. Black's comment that the budget is a "vital step to trigger reconciliation" has been echoed by Ways and Means Committee Chairman Kevin Brady (R-TX), who said on Fox News, "This budget gives us the green light, the vehicle to deliver tax reform this year, gives us the process to do that. So, this is an incredibly important vote." Reconciliation instructions would allow tax reform legislation to pass the Senate with 51 votes rather than the 60 necessary to overcome a filibuster.

Conservatives want deeper cuts than the $203 billion under reconciliation protection and have also called for a better understanding of the tax reform legislation the budget would facilitate. As the markup was drawing to a close, Rep. Mark Sanford (R-SC) said he was weighing offering an anti-border adjustability amendment, saying the proposal included the 2016 House Republican Blueprint on tax reform would impose a new $1.2 trillion tax on consumers. Chairman Black refused to entertain the amendment, saying it was not part of the agreement the Committee had reached for consideration of the budget. Sanford said he is concerned that border adjustability will be tapped to pay for full expensing or, given the uncertainty surrounding health care legislation, repeal of Affordable Care Act taxes under tax reform. Rep. Dave Brat (R-VA), like Sanford, a member of the Freedom Caucus, made similar comments near the start of the markup. Freedom Caucus Chairman Mark Meadows (R-NC) continued to say this week that the budget does not have the votes to pass the House.

However, other Republicans are wary of mandatory spending cuts that could include cuts to welfare and Medicaid, with the budget calling for new work requirements in both areas.

Rep. Jim Renacci (R-OH) was reported by Tax Notes as wanting more information about how the reconciliation instructions would account for mandatory spending savings and a tax proposal separately, and that a separation would be his preference. Renacci, who is also a member of the Ways and Means Committee, said during the markup that the budget resolution may make it more difficult to pass tax reform legislation.

In an opening statement, Chairman Black said the budget "specifically paves the way for pro-growth tax reform that will be deficit neutral and independent of reconciliation instructions for mandatory savings and reforms," and that those savings "would go toward deficit reduction and cannot be used to pay for tax reform." A budget staffer said during the markup that it is not within the purview of the Budget Committee or the reconciliation instructions to provide policy directives to committees, so the reconciliation instructions provide just a number. The instructions identify deficit reduction targets for each of the 11 committees, including $52 billion over 10 years for Ways and Means, but do not specify deficit neutrality or other parameters for tax reform legislation. A separate policy statement in the budget listed goals for tax reform legislation, including lower rates and "a more competitive system of international taxation."

The budget sets overall discretionary spending for FY 2018 at $1.132 trillion: $621.5 billion in defense discretionary spending; and $511 billion in non-defense discretionary spending. It calls for $6.5 trillion in deficit reduction and assumes economic growth of 2.6% on average over the 10-year budget window, which would result in $1.5 trillion in deficit reduction.

Ranking member John Yarmuth (D-KY) said the budget "cuts at least $1.5 trillion from Medicare and Medicaid, and puts at risk investments in nearly every national priority, from education and veteran services, to transportation, environmental protections, and medical research." The Committee defeated Democratic amendments opposing those cuts and challenging the budget's assumption of the reforms included in the House-passed American Health Care Act (AHCA).

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