President Trump discussed economic policies in his address to Congress on March 4, tax and trade especially, and made his case for imposing tariffs. On taxes, the President called for "permanent income tax cuts" — and suggested Democrats vote for them — and continued to call for no tax on tips, no tax on overtime, and no tax on Social Security benefits. He also called for cutting taxes on "domestic production and all manufacturing," and said 100% expensing, currently phased down under the TCJA, would be retroactive to January 20, 2025. "It was one of the main reasons why our tax cuts were so successful in our first term, giving us the most successful economy in the history of our country," he said.

On tariffs, President Trump said: "Reciprocal tariffs kick in and whatever they tariff us, other countries, we will tariff them. That's reciprocal, back and forth, whatever they tax us, we will tax them. If they do non-monetary tariffs, to keep us out of their market, then we will do non-monetary barriers to keep them out of our market. There's a lot of that, too. They don't even allow us in their market. We will take in trillions and trillions of dollars and create jobs like we have never seen before … tariffs are not just about protecting American jobs they're about protecting the soul of our country. Tariffs are about making America rich again and making America great again. And it's happening. And it will happen rather quickly. There will be a little disturbance. But we're okay with that. It won't be much."

Budget reconciliation — The focus of efforts to craft a unified House-Senate FY2025 budget resolution, to unlock the budget reconciliation process Republicans want to use to extend Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025, is now on timing and sequencing. Politico reported that House Ways & Means Committee Republicans "are tentatively scheduled on March 10 and 12 to start drafting the GOP's party-line bill enacting President Donald Trump's tax agenda," while Senate efforts to address issues related to the two chambers adopting the same budget resolution along the lines of what the House approved February 25 have not measurably progressed. Majority Leader John Thune (R-SD) said that any Senate vote related to the House budget wouldn't occur until after a congressional recess the week of March 17.

Government funding — These developments on reconciliation and the budget resolution come as Congress likely pivots to addressing the expiration of government funding looming on March 14. House Speaker Mike Johnson (R-LA) and President Trump have said efforts would focus on a continuing resolution (CR) of current funding levels through the end of the fiscal year on September 30. Top Democrats are opposed to that approach and may withhold support for a funding measure due to concerns about the Administration's scrutiny of spending and the federal workforce and spending levels not being adhered to. While some conservatives traditionally oppose CRs, House Freedom Caucus members are meeting with the President at the White House today and NBC News reported Rep. Chip Roy (R-TX) as saying he would likely support a so-called yearlong clean CR.

Calendar — In addition to the recess the week of March 17, a two-week recess in April is also figuring into lawmakers' plans for priority issues. Following is the congressional calendar for the next two months, with H representing days the House is in session and S for Senate session days.

Trade — The President imposed 25% tariffs on Canada and Mexico (10% on Canada energy resources) effective March 4, after a month-long delay. Commerce Secretary Howard Lutnick said last night that the President could announce as soon as today a compromise with the two nations. "I think he's going to work something out with them. It's not going to be a pause, not that pause stuff, but I think he's going to figure out — 'You do more, and I will meet you in the middle some way,'" he said.

There were many press stories describing the potential economic and political effects. "Imposing tariffs on everything Americans buy from Mexico and Canada is an extraordinary political gamble by a president who was returned to power by voters angered over years of high inflation," said a story in the March 4 Washington Post. "The new import taxes are likely to raise the market prices of Mexican tequila, beer and avocados, along with Canadian crude oil and lumber, testing consumer patience with Trump's approach."

The New York Times: "His actions have upended diplomatic relations with America's largest trading partners, sent markets tumbling, and provoked retaliation on U.S. products — leaving businesses, investors and economists puzzled as to why Mr. Trump would create such upheaval without extended negotiations … "

Congress — The House March 4 approved a Ways & Means Committee bill, the Chronic Disease Flexible Coverage Act (H.R. 919), which allows for employers who offer high-deductible health plan (HDHP) coverage for their employees the option of including pre-deductible coverage for certain healthcare services that treat common chronic illnesses, codifying a Trump administration policy established in 2019.

Ways & Means members Vern Buchanan (R-FL) and Mike Kelly (R-PA) March 3 introduced the American Innovation Act that would quadruple the amount of start-up costs small business owners can deduct from their federal income taxes, raising it from $5,000 to $20,000. Additionally, the bill would increase the threshold for deductions from $50,000 to $120,000 for start-up expenditures like advertising, employees' salaries and benefits, rent, and utilities for new office space.

On Thursday, March 6¸the Senate Finance Committee will hold a hearing on the nomination of Michael Faulkender to be Deputy Secretary of the Treasury.

Cryptocurrency — The Senate on Tuesday (March 4) voted to repeal a Biden-era regulation requiring some cryptocurrency platforms to report their customers' transactions to the Internal Revenue Service. The vote on the joint resolution (S.J. Res. 3), sponsored by Sen. Ted Cruz (R-TX), was 70-27, with 17 Democrats voting in support, including Minority Leader Chuck Schumer (NY), along with independent Angus King (ME). The resolution was offered under the Congressional Review Act, which allows the repeal of agency regulations with a simple majority vote in the Senate if the resolution is acted upon within a certain time frame of the rule's publication in the Federal Register. The House Ways and Means Committee reported out the resolution last week and the full House is expected to vote on it soon. It would represent the first time Congress has eliminated a tax rule using the CRA.

The IRS finalized the rule in December as part of its implementation of the 2021 infrastructure law, for which the crypto tax reporting regulation was a pay-for. The rule requires decentralized finance platforms to report detailed information on customers' transactions to the IRS, starting with tax year 2027. The Biden administration had argued that the regulation would be parallel to similar rules on tax reporting for securities, like stocks and bonds, but the digital asset industry said the requirements would be overly burdensome, the Wall Street Journal reported. The Joint Committee on Taxation has estimated that repealing the rule would cost $3.9 billion in revenue over 10 years. Republicans in Congress are planning several more CRAs to repeal Biden-era regulations in areas such as oil and gas drilling, limits on bank overdraft fees, appliance standards and rubber tire manufacturing.