House Republicans have taken a step toward extending Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025. The House Budget Committee February 13 approved Chairman Jodey Arrington's (R-TX) FY2025 budget resolution that provides reconciliation instructions to the Ways & Means Committee for up to a $4.5 trillion net increase in the deficit over 10 years to accommodate TCJA extensions and requires other committees to achieve $1.5 trillion in savings. The party-line 21-16 vote capped a 12-hour markup.

The Ways & Means instruction leaves room for few, if any, additional tax cuts. During an inquiry at the markup about President Trump's proposal to exempt tip income from tax, Chairman Arrington clarified that $4.5 trillion is sufficient to extend the TCJA for 10 years. He said there is additional potential savings in the code, including Inflation Reduction Act energy tax credits that are now scored at $750 billion, to pay for other tax cuts. "That's one example, hundreds of billions of dollars that are there, [and] will be debated by our conference as to which [provisions] stay, if any, and how much those savings can be put against presumably any of the other tax provisions, whether they are the promises made by the President or just any other tax provisions," Chairman Arrington said. He said the tax code "is riddled with special interest giveaways" that should be debated and could provide real savings toward better tax policy.

The ability to address tax provisions beyond TCJA extensions in a reconciliation bill had been a point of contention among Republicans. Tax Notes reported that Ways & Means Chairman Jason Smith (R-MO), who was concerned about the level of the committee's instruction prior to release of the budget, as saying, "Four and a half does not allow us to do what the president has requested, but it's a good first step."

Conservatives, whose support for the budget was in question, voted for the resolution after striking an agreement, reflected in an amendment that was approved 21-16, allowing more tax cuts if more savings is agreed to and strengthening a claw-back mechanism that would reduce the Ways & Means Committee's level of tax cut extensions if mandatory spending isn't cut by $2 trillion. Rep. Lloyd Smucker (R-PA) said the amendment would codify and enforce what was stated as a goal in the budget. He said the budget's instructions for $1.5 trillion in deficit reduction but call for $2 trillion overall reflects the fact that committees don't know how much savings they can achieve. "When we decided we believed we could achieve $2 trillion, we could not have the floor of each of the committees add up to that number," he said.

Democrats generally criticized the prospect of potential cuts to Medicare and Medicaid in the interest of extending tax cuts. "There is no way to make cuts this deep without slashing Medicaid, reducing our constituents' health care to pay for billionaires' tax cuts," Ways & Means member Judy Chu (D-CA) said. The Energy and Commerce Committee, which has jurisdiction over the Medicaid program, is instructed to lower the deficit by no less than $880 billion over the budget window. Issues addressed by Democratic amendments, all of which were defeated, included striking instructions to the Energy & Commerce, Education & Workforce, and Agriculture reconciliation committees. Rep. Pramila Jayapal's (D-WA) amendment to protect against Medicaid cuts, which she said Republicans have targeted as a funding source despite GOP members' concerns and some red states relying on the program, was defeated on a 16-21 vote.

Even with the House action, the debate with the Senate regarding one bill vs. two bills for reconciliation remains unsettled. The Senate Budget Committee February 12 approved 11-10 an FY2025 budget reflecting the Senate's two-bill plan that would provide border security funding first and push tax decisions until later, in a second bill. Tax amendments were ruled out of order. Senate floor consideration is possible next week, when the House is in recess. Both sides argued for their respective approaches. Chairman Arrington said after his panel's vote, "It's time to meet this generational moment and join President Trump in making the tough decisions that preserve our republic for our children and grandchildren. This is our last, best shot to do it. This is the only comprehensive deal Congress has on the table to get the job done."

Tax — The duration of TCJA provisions remains in question, and some members want a permanent rather than temporary extension. A February 13 letter from nine Republican members of the Senate Finance Committee (Daines, Thune, Crapo, Barrasso, Lankford, Johnson, Marshall, Blackburn, Tillis) said they won't support a package that extends TCJA provisions on a temporary basis. "A temporary extension of these pro-growth and pro-family policies is a missed opportunity. Businesses need certainty … " they said. (SFC Republicans not signing the letter: Grassley, Cornyn, Cassidy, Scott, Young.)

Trade — President Trump February 13 signed a memorandum directing the Administration to conduct a review to calculate and ultimately impose reciprocal tariffs on a country-by-country basis, accounting for both tariff rates and non-tariff barriers. Any new tariffs under the memo could be months away.

The memo described a "Fair and Reciprocal Plan" to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with foreign trading partners through an examination of:

• tariffs imposed on US products
• unfair, discriminatory, or extraterritorial taxes, "including a value-added tax"
• costs to US businesses, workers, and consumers from nontariff barriers and unfair policies, including subsidies and burdensome regulatory requirements on US businesses operating overseas in other countries
• policies and practices that cause exchange rates to deviate from their market value
• any other practice that imposes any unfair limitation on market access or any structural impediment to fair competition

The review is to involve the United States Trade Representative, the Secretary of the Treasury, the Secretary of Commerce, the Senior Counselor to the President for Trade and Manufacturing, and others, beginning after submission of the specified agency reports due under the America First Trade Policy Memorandum, for which submissions are to be compiled by April 1. The Office of Management and Budget Director is to assess impacts to the government and public within 180 days of issuance of the memo.

The President said there would be no exemptions from the potential tariffs. "Because you don't need to with reciprocal, you don't need to," he said. Regarding the outlook for tariffs, he said, "I think autos are coming soon. I think they're all coming, more or less, at the same time. And it's not going to be a big shock to the system, but what it's going to do is it's going to bring pharmaceuticals back to our country. Much more important than the money. It's a lot of money, but it's going to bring pharmaceuticals back to our country. It's going to bring chips back to our country … we're going to do a lot more automobile manufacturing."

The effects of the tariffs were the subject of much speculation. "The decision to rework the tariffs that America charges on imported goods would represent a dramatic overhaul of the global trading system. For decades, the United States has set its tariff levels through negotiations at international trade bodies like the World Trade Organization," the New York Times reported. "Setting new levies — likely to be higher than what the United States charges today — would effectively scrap that system in favor of one determined solely by U.S. officials and based on their own criteria."

Tax administration — On February 12, the Ways & Means Committee approved:

• H.R. 997, the National Taxpayer Advocate Enhancement Act of 2025 on a 43-0 vote
• H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act on a 43-0 vote
• H.R. 1152, the Electronic Filing and Payment Fairness Act on a 41-0 vote
• H.R. 1155, the Recovery of Stolen Checks Act on a 41-0 vote

Bill intros — Bills of interest introduced February 12 include:

• S. 536/H.R. 1253, to establish a tax on the sale of electric vehicles and batteries, Senator Deb Fischer (R-NE)/Rep. Dusty Johnson (R-SD)
• S. 541, to repeal the credit for new clean vehicles, Senator John Barrasso (R-WY)

Congress — The Senate Finance Committee February 12 approved the nomination of Jamieson Greer to be United States Trade Representative (USTR) 15-12, with Senator Sheldon Whitehouse (D-RI) joining Republicans to vote in favor.

The Senate approved the nomination of Tulsi Gabbard to be Director of National Intelligence and Robert F. Kennedy, Jr.'s nomination for HHS Secretary, both on 52-48 votes.

What to Expect in Washington won't be published on February 17 because of the holiday.