The Senate could vote as soon as Wednesday on an FY2025 budget resolution to unlock the budget reconciliation process Republicans want to use to pass a GOP-only bill to extend expiring Tax Cuts & Jobs Act (TCJA) provisions by a simple-majority vote in both chambers (averting a Senate filibuster). The vote will likely be preceded by a ruling from the Senate parliamentarian on whether a current policy baseline, which wouldn't count the cost of extending current tax cuts and is viewed as the best chance for making them permanent, will be permitted under reconciliation rules.

Politico reported last evening that a joint meeting with the parliamentarian and Republican and Democratic aides, to make the case for and against a current policy baseline, has still yet to be scheduled, but Republican senators have encouraged Majority Leader John Thune (R-SD) to hold the vote this week in the interest of making progress toward the tax bill. It's unclear whether the House could then vote on the budget agreement, which isn't expected to change House reconciliation instructions to House committees — including to Ways & Means for a $4.5 trillion net deficit increase to cover TCJA extensions that is reduced if total savings falls short of $2 trillion, and to Energy & Commerce for at least $880 billion in spending cuts — but may only mandate nominal savings from Senate committees.

That approach would allow for progress toward the bill while postponing difficult decisions, reflecting the fact that some Republicans only want to vote in favor of tax cut extensions if they are accompanied by significant spending cuts; while others don't want to pursue deep spending cuts, especially if the Energy & Commerce instruction requires significant Medicaid changes. Senate reconciliation instructions with a much lower floor for savings would mirror the Senate-passed FY2025 resolution — which was intended for a narrower border-focused bill, with tax to come later under a different resolution — that required a $1 billion deficit reduction floor from each of five Senate committees.

On Face the Nation yesterday, House Budget Committee Chairman Jodey Arrington (R-TX) repeated the assertion from President Trump and House Speaker Mike Johnson (R-LA) that Medicaid changes wouldn't cut benefits. There are "a lot of ways to reorient the system, to make it more efficient, to root out waste and fraud, and it's well over the $800 billion. It's commonsense, straightforward, and you don't have to touch a dime of the benefits," he said.

On Fox Sunday Morning Futures, Senator Ron Johnson (R-WI) suggested his support for the budget resolution requires a commitment for a deficit commission: "I don't think people voted for Republicans expecting to pretty well retain President Biden's spending level. So, we have to get serious about returning to a pre-pandemic level. It shouldn't be that hard. In business, this would be easy, but we need a process for it. And we never had a process … The Budget Control Act didn't do it. Simpson-Bowles didn't do it. So what I have suggested … is, set up a panel, senators, House members, and members of the administration, to sit for basically a type of budget review meeting panel … "

There are likely several more differences among Republicans that must be resolved in the development of the reconciliation bill, including settling on revenue offsets that will be required for tax items beyond TCJA extensions, such as President Trump's proposals that include for no tax on tips, overtime, and Social Security benefits, and cutting taxes on "domestic production and all manufacturing." Punchbowl News reported last night, "one of the challenges in this process for Republicans is that, along with more intense deficit-hawk pressure, they've got less low-hanging fruit in terms of offset options. The 2017 bill used up some of those options, and it's inherently trickier when tax extensions are the main focal point."

A March 28 Axios story said, "The Trump administration is discussing a surprising option to help fulfill his campaign-trail promises: Allowing the richest Americans' tax rates to rise in return for cutting taxes on tips … Some White House officials believe letting income taxes on the very highest earners rise would buy breathing room on other priorities, and help blunt Democrats' attacks as they seek to extend President Trump's 2017 tax cuts." Letting provisions expire for high earners was the approach taken to address the year-end 2012 expiration of the Bush tax cuts, but that tax bill was bipartisan and not under reconciliation.

A "Big Six" meeting with the top Republican leaders in each chamber, tax committee chairmen, Treasury Secretary Scott Bessent, and National Economic Council Director Kevin Hassett is expected on Tuesday, April 1. Morning Tax reported that Ways & Means Committee Republicans will hold another daylong meeting on issues surrounding the development of the tax bill on Thursday.

Energy tax — One oft-cited revenue target for at least some Republicans is the rollback of Inflation Reduction Act (IRA) energy tax credits, though 21 GOP House members urged caution in a recent letter. An editorial in the March 29 Wall Street Journal suggested that "some Republicans have bought their line that rolling back the subsidies will raise energy prices," and argued "like other entitlements, the green subsidies have outgrown their original purpose." The editorial said while some projects subsidized by the IRA are in Republican districts, "other energy projects like gas plants and pipelines don't need subsidies. If Republicans are going to ratify Joe Biden's Green New Deal, what is the point of electing a GOP Congress?"

Trade - There will be a great deal of attention on trade developments this week with completion of reviews due April 1 under the America First Trade Policy memo and expected reciprocal tariffs April 2, which President Trump has deemed a "Liberation Day" featuring "the big one" in terms of tariff announcements.

"Although many of his allies on Wall Street and Capitol Hill have urged the White House to take a more conciliatory approach, Trump has continued to press for aggressive measures to fundamentally transform the U.S. economy … " a March 29 Washington Post story said. "Trump's advisers are in intensive deliberations about the exact scope of the import duties to be imposed, which officials have described as affecting trillions of dollars' worth of trade."

Treasury Secretary Bessent previously suggested that the focus is on 15% of nations with persistent trade imbalances with the U.S., but President Trump has since said all countries could be targeted. The U.S.'s top bilateral deficits last year included China ($295 billion), Mexico ($172 billion), Vietnam ($122 billion), Ireland ($87 billion), Germany ($85 billion), Taiwan ($74 billion), Japan ($68 billion), South Korea ($66 billion), Canada ($64 billion) and India ($46 billion). A reciprocal tariff rate could apply to all imports from a trading partner or could apply to a subset of goods. It's unclear whether there will be a formal exemption process. The President said March 24, "I may give a lot of countries breaks, but it's reciprocal."

The America First Trade Policy executive order issued on January 20 outlined a cross-agency effort to investigate a range of trade issues: trade deficits, unfair trading practices, currency manipulation, de minimis exemption for low value imports, a comprehensive review of the existing tariff regime, and exemptions, with a deadline of April 1. The EO also had a tax component: Treasury, Commerce, and the USTR "shall investigate whether any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891," which allows for the doubling of rates of tax on citizens and corporations of countries who impose discriminatory or extraterritorial taxes on the US.

Congress — The House is back in session March 31 with votes beginning at 6:30 p.m. on several Ways & Means bills under the suspension calendar:

• H.R. 517 — Filing Relief for Natural Disasters Act, as amended (Rep. Kustoff)
• H.R. 998 — Internal Revenue Service Math and Taxpayer Help Act (Rep. Feenstra)
• H.R. 997 — National Taxpayer Advocate Enhancement Act (Rep. Feenstra)
• H.R. 1152 — Electronic Filing and Payment Fairness Act (Rep. LaHood)
• H.R. 1155 — Recovery of Stolen Checks Act (Rep. Malliotakis)
• H.R. 1491 — Disaster Related Extension of Deadlines Act (Rep. Murphy)

The Senate is also back in today and at 5:30 p.m. will hold a procedural vote in relation to the nomination of Matthew Whitaker to be United States Permanent Representative on the Council of NATO.

Health hearings include:

• Senate Judiciary Committee executive business meeting to discuss prescription drug patent legislation, April 3 at 10:15 a.m.
• House Education and Workforce Committee hearing on "A Healthy Workforce: Expanding Access and Affordability in Employer-Sponsored Health Care," April 2 at 2 p.m.
• House Energy and Commerce Subcommittee on Health hearing on "Examining the FDA's Regulation of Over-the-Counter Monograph Drugs," April 1 at 10:15 a.m.
• House Energy and Commerce Subcommittee on Oversight and Investigations hearing on "Aging Technology, Emerging Threats: Examining Cybersecurity Vulnerabilities in Legacy Medical Devices," April 1 at 10:30 a.m.

There are two special elections in Florida April 1, to replace Rep. Matt Gaetz (R-FL), who resigned effective November 13, 2024, and did not take the oath of office for the 119th Congress, and Rep. Mike Waltz (R-FL), who joined the Administration as National Security Advisor. Following a similar WSJ story last week, the New York Times reported March 30 that the race for the Waltz seat is unexpectedly competitive and "with Republicans clinging to their House majority by just a few seats, it was clear this week that voters in the district are thinking about what the outcome of the race — and of another race for former Representative Matt Gaetz's seat in the Florida Panhandle — could mean for Mr. Trump's agenda."