The House took a big step to advance Republican plans to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 in a budget reconciliation bill that can pass Congress with GOP-only votes, adopting a FY2025 budget resolution 217-215 late February 25. Rep. Thomas Massie (R-KY) was the only Republican to vote "no" after other holdouts agreed to vote in favor. The resolution requires at least $2 trillion in deficit reduction from other committees to avail the Ways & Means Committee a full $4.5 trillion net deficit increase for tax cuts. A minimum of $1.5 trillion in mandatory spending cuts is required from the other committees, including $880 billion from the Energy & Commerce Committee that has jurisdiction over Medicaid. Notably, the total tax cut amount is reduced by the amount savings are short of $2 trillion.

House Budget Committee Chairman Jodey Arrington (R-TX) — who crafted the resolution that passed the fractious House conference and played a part in convincing Republican holdouts to vote for the budget on the floor — posted on social media: "WOW! @HouseGOP just passed my budget resolution that provides the fiscal framework for what will be one of the most consequential pieces of legislation in modern history and the principal legislative vehicle for delivering on President @realDonaldTrump's America First agenda."

Concerns among some House Republicans included both the nature of the Medicaid cuts and the uncertain outlook for extending government funding that expires on March 14. On CNN, Rep. Nick LaLota (R-NY) said the budget resolution, which he noted is different than budget reconciliation legislation, was a procedural vote "to then have an opportunity to have a policy discussion on tax and spending," echoing a message GOP leaders delivered to rank-and-file members. Following President Trump's comments that programs like Medicaid won't be touched aside from combating fraud, LaLota said Republicans are united on the issues of preventing illegal immigrants from receiving benefits, instituting work requirements, and addressing waste, fraud, and abuse. "Scores of members are opposed to cuts in Medicaid that go beyond that," he said.

Crafting the reconciliation legislation will require significant negotiation among GOP members. House Speaker Mike Johnson (R-LA) said February 25, "this resolution itself contains no policies. It is a framework only. And it's the product of months and months of work completed with the input of over 95% of the individual members of the Republican Conference … It's sort of the kickoff in what will be a four-quarter game. And that very important, very consequential game begins as soon as we get this thing passed."

The extension of government funding beyond the March 14 expiration has been overshadowed by the budget process, but the two issues were becoming entwined. Rep. Warren Davidson (R-OH) said he wanted more information about the plan to fund the government before voting on the budget, but eventually voted yes during an hour-long floor process that saw leaders call off the vote and then put it back on the floor.

House leaders now need to negotiate a compromise with the Senate, which has passed its own FY2025 budget reflecting a two-bill plan for more than $340 billion in mostly border security and defense funding in a first bill and push tax issues until later this year. Senator Josh Hawley (R-MO) has expressed concerns about potential Medicaid cuts under the House budget. Top Republican Senators want to make the expiring TCJA provisions permanent by using a current policy baseline, rather than the current law baseline under the House, and have expressed concerns that the House resolution doesn't provide sufficient space to achieve that. Both chambers will need to pass the same budget to unlock the reconciliation process.

President Trump has expressed a preference for one big bill as the House favors but has overall remained ambivalent about the mechanics of the process. He said yesterday, "So, the House has a bill, and the Senate has a bill, and I'm looking at them both and I'll make decisions … I know the Senate's doing very well and the House is doing very well, but each one of them has things that I like. So, we'll see if we can come together."

Tax — Politico February 24 reported Chairman Smith as saying the Ways & Means instruction for a $4.5 trillion net deficit increase for tax cuts will likely allow for only an eight to nine-year extension of TCJA provisions if the Committee also includes some of President Trump's campaign tax proposals, which the President enumerated in a list during a White House meeting. "No tax on tips was number one listed. And then no tax on overtime, tax relief for seniors. Those were three of the eight that was listed," Smith said. Chairman Smith said of the current policy baseline advocated in the Senate, which wouldn't count the cost of tax cut extensions, "I've advocated for the policy baseline on this side of the building, but it just didn't make the cut. So, if the Senate wants to make the cut, I'd be very supportive of it."

Bloomberg reported that Treasury Secretary Scott Bessent and congressional leaders — House Speaker Johnson, Senate Majority Leader John Thune (R-SD), and tax committee chairmen Smith and Senator Mike Crapo (R-ID) — will begin meeting weekly to lay the groundwork for an eventual tax package headlined by TCJA extensions.

According to the Congressional Budget Office (CBO), a 10-year extension of expiring TCJA tax provisions would cost $4 trillion/10 years, not including interest costs. While the estimates have been expected to be updated, a February 25 Politico story said: "Republicans are sticking with nearly year-old numbers, in part because they're the ones they've been using all along. Lawmakers for months have been considering scads of different tax policy options behind closed doors, and a whole new slate of estimates could scramble their internal deliberations. But it's possible that if the price tag was updated, it would go significantly higher … "

Government funding - Both parties say they are close to a deal on topline spending numbers for defense and nondefense discretionary spending, but Democrats are seeking assurances that the Administration will follow the spending bill. Scrutiny of spending and the federal workforce through the Department of Government Efficiency (DOGE) threaten Democratic support that will likely be necessary for a funding measure. Senate Majority Thune said February 25, on the March 14 funding deadline: "We're keeping all options on the table, but we are running out of time. And so, I think that, you know, realistically, we have to think about, 'How can we fund the government?' Make sure there isn't a government shutdown."

Trade — The February 25 House Ways & Means Trade Subcommittee hearing on American Trade Enforcement Priorities included discussion of the de minimis exception, the upcoming review of the USMCA in 2026, inaction on the trade agenda during the last Administration, and, from Democrats at least, concerns about the consumer costs of tariffs that may be pursued by the current Administration. There was relatively little discussion about the specifics of the tariff announcements by President Trump, and some of the Administration's plans are in flux, pending reviews and recommendations due April 1 under the America First Trade Policy memo. There were no government witnesses at the hearing.

Full Committee Chairman Jason Smith asked about reforming the de minimis exception, which allows merchandise worth up to $800 to be imported free of duties and taxes, and about the fiscal role of tariffs. Witness Jeffrey Gerrish, a former Deputy US Trade Representative in the first Trump administration, said tariffs have the potential to raise hundreds of billions of dollars.

Rep. Jimmy Panetta (D-CA) said he was disappointed in the last Administration's reluctance to pursue free trade agreements (FTAs) but is concerned with recently announced tariffs. Similarly, Rep. Suzan DelBene (D-WA) said tariffs represent a tax on US consumers. Rep. Don Beyer (D-VA) likewise said farmers and ranchers could suffer from retaliatory tariffs and challenged the idea that tariffs should be used as a revenue offset for TCJA extensions because of the ease with which they can be rescinded. Witness Greta Peisch, who formerly served in the Biden USTR office and Senate Finance Committee staff, said tariffs are a tool to change behavior and have a specific agenda that isn't to raise revenue.

Congress — At noon today (February 26), the Senate will vote on confirmation of Jamieson Greer to be US Trade Representative. The Senate has also taken a procedural step toward approving the nomination of Linda McMahon to be Secretary of Education.

Today (February 26) at 10 a.m., the Ways & Means Committee is marking up:

• H.R. 1491, the Disaster Related Extension of Deadlines Act
• H.R. 517, the Filing Relief for Natural Disasters Act
• H. J. Res. 25, Disapproving the rule submitted by the Internal Revenue Service related to Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales

The disapproval, under the Congressional Review Act process, addresses December 2024 final regulations (TD 10021) for digital asset brokers under IRC Section 6045 that require certain decentralized finance (DeFi) industry participants to file and provide information returns as brokers. The December 2024 Regulations generally apply to sales of digital assets occurring on or after January 1, 2027, and under the resolution the regulations would immediately cease to have effect and be treated as though they had never taken effect.