Incoming Senate Majority Leader John Thune (R-SD) and House Ways & Means Committee Chairman Jason Smith (R-MO) met December 11 to discuss plans for the budget reconciliation process in 2025, which despite clearing the way for two GOP-only priority packages without compromising with Democrats is splitting Republicans over issues including sequencing. The meeting was brokered by Senator Markwayne Mullin (R-OK), who has a nexus to the interested parties as a former House member close to Chairman Smith, now a Senator, and with connections to the incoming Trump administration. The President-elect hasn't publicly weighed in on reconciliation plans, but his top domestic advisor last weekend expressed support for Thune's plan to act first on a reconciliation bill on border and energy and save tax for a second reconciliation package later. Chairman Smith wants extensions of expiring Tax Cuts & Jobs Act (TCJA) provisions included in the first bill.

There were no apparent breakthroughs reported from the meeting but some good discussion, nonetheless. "We'll get on the same page within the coming weeks," Senator Mullin said, according to Politico. It's universally recognized that President-elect Trump will make the decision on how to proceed. A Wall Street Journal story (WSJ) cited Chairman Smith as saying he was just trying to provide the incoming Administration with all the requisite information about getting tax priorities passed out of the House. "If he wants to let [House members] continue to fight it, unless he feels super strong about it, there's no need for him to sign his voice to it," said Sen. Kevin Cramer (R., N.D.), who favors the two-bill approach, in the WSJ report. "But if he did, it would be over, assuming he agrees."

In a December 12 interview with Hugh Hewitt, House Majority Leader Steve Scalise (R-LA) said he expressed "what are the pros and cons of one versus two reconciliation bills, because I do think there's some pitfalls with the two-bill approach. But I've laid out what those are. Ultimately, the President is going to decide." He said, "For most Americans, they don't care. Just 'go get it done.' So, our focus needs to be on making this decision. People are excited about Donald Trump coming into office. I think that first bill, everybody's going to want to be a part of. So put all of it in there. You know, that's an argument for one bill."

Of course, beyond the sequencing of the reconciliation bills is the substance of issues like how to address the current $10,000 state and local tax (SALT) deduction cap that Republicans (and Democrats) from high-tax states will want changed. "Economist Stephen Moore, a member of Trump's economic advisory transition team, told Bloomberg Thursday that the group has discussed expanding the cap on the deduction from $10,000 to $20,000," according to a report.

The Congressional Budget Office (CBO) December 12 published "Options for Reducing the Deficit: 2025 to 2034," a periodically published tome of spending cut and tax increase ideas. It's unclear how viable for the new Republican Congress the ideas in the report would be, which include taxing carried interest as ordinary income and imposing a tax on financial transactions.

Congress — Most of the year-end action for Congress has been rolled to next week, when the Senate will consider the House-passed National Defense Authorization Act (NDAA) and the House and Senate must clear a continuing resolution (CR) to extend government funding into March that is expected to be released this weekend. Disaster relief seems promising as an add-on to the CR, and it remains to be seen if anything on the farm bill or other issues can be attached.

On December 9, Senator Lindsey Graham (R-SC) and Senate Finance Committee members Thom Tillis (R-NC) and Tim Scott (R-SC), whose states were affected by Hurricane Helene, introduced S. 5457, to allow a portion of general business credit carryforwards to be utilized by certain taxpayers affected by federally declared disasters.

Health care — On December 11, Senators Elizabeth Warren (D-MA) and Josh Hawley (R-MO), and Representatives Diana Harshbarger (R-TN) and Jake Auchincloss (D-MA) introduced the Patients Before Monopolies (PBM) Act to prohibit joint ownership of pharmacy benefit managers (PBMs) and pharmacies.

"If passed, the legislation would be the most far-reaching intervention yet into the operations of pharmacy-benefit managers, known as PBMs, and their parent companies, cutting off a major source of revenue for the companies and frustration for patients," the WSJ said.

Finance — It was another day of surprises at the House Steering Committee, where on Wednesday (12/11) the powerful panel had named Rep. Brian Mast (R-FL) chairman of the Foreign Affairs Committee for the 119th Congress, over the favored Ann Wagner (R-MO) and others. On Thursday, the Steering Committee chose French Hill (R-AR) to chair the Financial Services Committee, out of a group that also included Reps. Andy Barr (R-KY), Bill Huizenga (R-MI) and Frank Lucas (R-OK). Hill reportedly won on a second ballot after Lucas was eliminated. Barr, an ally of Majority Leader Steve Scalise (R-LA) who had pitched himself as a bridge between free-market and "MAGA" Republicans, had been the presumed favorite going into this week. Hill had also been a supporter of ousted former speaker Kevin McCarthy (R-CA). Hill, who founded a community bank in his hometown of Little Rock, Ark., had pitched his extensive public policy experience, with positions as a deputy assistant Treasury secretary, White House staffer for President George H.W. Bush and staff to the Senate Banking Committee. Hill is the vice chair of the full committee and chairs the committee's Digital Assets Subcommittee. Politico reported that some committee Republicans saw the choice as a nod to Hill's success in drafting and recruiting Democratic support for "FIT21," the GOP's bill creating a broad regulatory framework for crypto trading, which passed the House with 71 Democratic votes in May. Punchbowl reported that Steering Committee members had questioned Barr about whether he plans to run for Sen. Mitch McConnell's (R-KY) seat if McConnell retires in 2026, as many expect.

Today (December 13) at noon, is the EY Webcast, "Tax in a time of transition."