It was known since before the elections that a Republican trifecta of control in Washington in 2025 would allow GOP lawmakers the opportunity for two separate reconciliation packages next year — using the FY2025 budget resolution, because the current Congress did not process one, then another for FY2026 — but there have been mixed signals about what priorities would go in each. House Republican leaders have created the impression that extension of Tax Cut & Jobs Act (TCJA) provisions expiring at the end of 2025 would go in a first-100 days reconciliation bill in the interest of, as Majority Leader Steve Scalise (R-LA) said November 19, "making sure there is no tax hike next year."

Senators have largely been more circumspect about their expectations for reconciliation, which allows a bill to pass the Senate with a simple majority vote, until now. Incoming Senate Majority Leader John Thune (R-SD) was cited by multiple news outlets as telling fellow Senate Republicans December 3 that he envisions two reconciliation bills: the first, within the first 30 days of the Trump administration, dealing with Republican priorities on the border, defense, and energy; and a later bill to address tax issues and other Administration priorities. According to Bloomberg Government, "Sen. John Cornyn (R-Texas) called the discussions 'very preliminary' and said no decisions were made."

Punchbowl News, which also reported that Thune's proposed timeline "would give Republicans additional time to do a separate reconciliation package centered on the Trump tax cuts," cited House Ways & Means Committee Chairman Jason Smith (R-MO) as saying last evening of the idea of doing a non-tax reconciliation bill in the first 30 days of the new Trump administration, as opposed to leading with a tax package, "I think it's a reckless decision … I think that they are creating an opportunity to increase taxes for all Americans."

Thune's comments loosely track with Senate Finance Committee member Ron Johnson (R-WI) saying at a November 20 Bloomberg Daily Tax Report event that there have been discussions of an initial reconciliation bill focused on Trump campaign tax proposals and a follow-on bill later that he wants to include a reconsideration of the tax system beyond just TCJA extensions. Prior to that, in a story in the November 12 Wall Street Journal (WSJ), Senator Johnson said a "straight extension" of tax cuts would be a "mindless approach" and detract from the pursuit of rate-lowering, base-broadening tax policies, and called for pumping the breaks on timing. "We've got a year. I'd rather take that year," he said. "The clock is ticking on this but we don't have to hop on this in the first few months."

The latest comments were made during a five-hour Senate Republican policy agenda retreat at the Library of Congress December 3 "led by incoming Republican Policy Chair Shelley Moore Capito (R-WV)," Semafor reported ahead of the meeting. The report cited Sen. John Kennedy (R-LA) as saying Republicans should pack in as much as they can in reconciliation bills. "Everything. We may put Daylight Savings Time," he told Semafor. "The mistake we made last time was not putting [in] as much as we could in."

Government funding — President-elect Trump hasn't publicly weighed in on his vision for reconciliation bill sequencing — though he did call in to the Senate GOP meeting for what was described as a "pep talk" — nor the approach Congress should take to government funding required by the current December 20 deadline, as Politico noted in a December 2 story. The two paths available to lawmakers for government funding are a continuing resolution (CR) to carry government funding likely through sometime in March, or a "clear-the-decks" omnibus spending bill through the end of the fiscal year (September 30, 2025). Multiple members have said disaster relief and a one-year farm bill extension are likely to be attached.

The report said, "A grand deal on final funding bills is highly unlikely before the Dec. 20 deadline, considering Speaker Mike Johnson and Senate Majority Leader Chuck Schumer have yet to strike a 'toplines' agreement on overall spending totals for the military and non-defense programs. So lawmakers must now ready yet another stopgap that keeps federal agencies running on static funding … " Additionally, "Republicans had been waiting for Trump to indicate" which approach he preferred.

The CR approach brings into play the June 2023 Fiscal Responsibility Act (FRA), which sets topline limits for FY2025 spending and includes an action-forcing provision that would establish temporary caps at 99% of current funding levels if all 12 appropriations bills are not passed by January 1 of 2025 (with the technical sequester enforcement mechanism related to the funding reduction taking effect on April 30). If the backstop mechanism takes effect, the revised levels would result in an increase in nondefense discretionary budget authority relative to the established topline levels and a decrease for defense discretionary spending levels when compared with the original levels.

Congress — In the remaining uncalled House race in CA-13, Rep. John Duarte (R-CA) yesterday conceded to Democrat Adam Gray. That sets a 220-215 House ratio in the next Congress. With three Republican seats affected by Trump nominations — Rep. Elise Stefanik (R-NY) as UN Ambassador, Rep. Mike Waltz (R-FL) as National Security Adviser, and Rep. Matt Gaetz (R-FL) as Attorney General (withdrawn) — the ratio will likely drop to 217-215 early in the year. Special elections for the Waltz and Gaetz seats have been set for April 1.

In Senate Democratic leadership elections yesterday, current Senate Majority Leader Chuck Schumer (D-NY) was elected Democratic leader and Senator Dick Durbin (D-IL) elected Whip, with Senators Elizabeth Warren (D-MA) and Mark Warner (D-VA) also re-elected as vice chairs of the Democratic Caucus. Senator Amy Klobuchar (D-MN) was elected to the number 3 post as Chair of Steering and Policy Committee and Cory Booker (D-NJ) to the number 4 post as Chair of the Strategic Communications Committee.

Energy tax — Reuters reported December 3, "Biden administration officials will not finalize highly anticipated guidelines on new clean fuel production tax credits aimed at the airline and biofuel industries before they leave in January … The tax credit, the engine behind President Joe Biden's ambitious plan to generate 3 billion gallons in production of sustainable aviation fuels (SAF) by 2030, was due to become effective Jan. 1, but a lack of detailed guidance from the U.S. Treasury would render the program dormant."

Conversely, Bloomberg reported later on December 3, "The Biden administration anticipates guidance for clean fuel production tax credits that will enable eligible producers to claim the 45Z credit for 2025, according to a Treasury Department spokesperson."

Global tax — Following Senate Finance Committee member Marsha Blackburn's (R-TN) statement over the weekend that President-elect Trump "is not going to allow U.S. companies to carry the bulk of" the tax burden imposed by Pillar One and Pillar Two (global minimum tax) of the OECD-led BEPS 2.0 project, Morning Tax reported December 3: "There are some areas that Republicans are already starting to coalesce around ahead of next year, including pushing back hard on the global tax deal struck under Biden's watch. GOP tax writers have been warning other countries to tread carefully with that global agreement, which allows those governments to tax American companies if they don't meet a minimum tax threshold."

Further, "Countries that have enacted digital services taxes have also been put on warning by Trump's election, given his longstanding support for retaliatory tariffs. 'It's not something we're going to, quite frankly, put up with to be able to do a transfer of wealth from the United States to the rest of the world,' said Sen. James Lankford (R-Okla.)."

Next administration — President-elect Trump's Treasury Secretary nominee Scott Bessent is beginning his meetings with senators this week, reportedly including Senators Thune and Whip John Barrasso (R-WY).