Senate Republicans last night cleared a procedural hurdle for a retooled version of the FY2025 budget resolution that would unlock the reconciliation process for a tax bill, set a current policy baseline that wouldn't count the $4 trillion cost of Tax Cuts & Jobs Act (TCJA) extensions, and provide the Finance Committee an instruction for up to a $1.5 trillion deficit increase for additional tax cuts. The vote to begin debate on the resolution was 52-48, with Senator Rand Paul (R-KY) as the lone Republican joining all Democrats in opposition. He is planning to offer an amendment to sharply reduce the $5 trillion increase in the federal debt limit provided under the resolution.

The Senate may turn to the vote-a-rama process of multiple amendment votes that caps consideration of the budget resolution this evening and perhaps vote on passage of the resolution as early as Saturday morning. Democrats are expected to offer amendments challenging the tax cut extensions, the $2 trillion in mandatory spending cuts that the House plan includes, President Trump's new tariff announcements, and other issues.

The resolution retains the House budget's 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 only mandates nominal savings from Senate committees. That approach postpones difficult intraparty decisions. Some House Republicans only want to vote in favor of tax cut extensions if they are accompanied by significant spending cuts, while other members, including some senators, don't want to pursue deep spending cuts, especially if the Energy & Commerce instruction requires significant Medicaid changes.

Republican senators acknowledge that postponing a confrontation over House-Senate differences doesn't resolve them. "It's not gonna go away just because we will it to go away," Senate Lisa Murkowski (R-AK) said in Punchbowl News this morning, regarding House-Senate tensions over Medicaid cuts. "We're just gonna be dealing with it later on." Senate Republicans also sidestepped plans to get guidance from the parliamentarian over whether a current policy baseline will pass muster under reconciliation rules. Politico said there were efforts by leadership Thursday "to quell anxieties among the lawmakers that letting Senate Budget Chair Lindsey Graham decide the baseline could come back to haunt them if it later ends up running aground of budget rules in the final bill."

The Senate plan drew criticism from House Budget Committee Chairman Budget Jodey Arrington (R-TX) as fiscally irresponsible — he said not making spending cuts enforceable at the budget resolution level means they probably won't happen — and unlikely to be supported by some House Republicans. "I can't imagine any world where deficit hawks in the House would ever walk away from the reconciliation process with the deficit going up at the rate it would with that framework," he said in a Politico report. "I would have tremendous concern." There are questions about whether the Senate resolution can be approved by the House, at least prior to the next congressional recess scheduled to begin April 11. Both chambers must pass the same budget to unlock the reconciliation process.

The report also included concerns from Ways & Means members Reps. Greg Steube (R-FL) and Lloyd Smucker (R-PA) about the increased tax cut allowance from $4.5 trillion under the House resolution to an expected $5.3 trillion under the Senate version. Senate Finance Committee Chairman Mike Crapo (R-ID) has suggested TCJA extensions would cost $3.8 trillion, the cost of which would be disregarded under the current policy baseline, and extension of already expired TCJA provisions — 100% expensing (which is in the midst of a phasedown in 20% increments), five-year R&D amortization, and the calculation for interest expense deductions (EBITDA to EBIT) — would be $500 billion more. The Chairman has suggested a tax bill could include changes to the Child Tax Credit and the President's tax proposals. Tax increases are also possible.

"That $1.5 trillion is a net number, so the Finance Committee could add more tax cuts if it reduces spending on Medicaid or raises taxes elsewhere," a story in the April 3 Wall Street Journal said. "For example, Republicans have been planning to curtail or repeal clean-energy tax breaks that Democrats created in 2022, but they haven't decided yet how far they're willing to go or how much money that would generate."

Potential tax increases to cover other tax cuts are among the issues still to be resolved in the development of the reconciliation bill, in addition to relief from the TCJA $10,000 state and local tax (SALT) deduction cap that GOP members from high-tax states are seeking. And there continue to be rumblings about the Administration's reported consideration of tax increases. Bloomberg reported April 3, "Republicans are weighing the creation of a new bracket for those earning $1 million or more to offset some of the costs of their tax bill, a stark departure from decades of GOP opposition to tax increases … Deliberations have included a new top rate that would be around 39% to 40%."

Trade — There have been many press stories about the effects of President Trump's April 2 "Liberation Day" announcement of his Reciprocal Tariff Policy — on the prices of imported goods, the economy and the stock market, and other nations' inclination to retaliate — as well as the apparent reluctance of most congressional Republicans to challenge the tariffs. President Trump announced the imposition of 10% universal tariffs on imported products from all countries and an additional country-specific ad valorem tariff rate on the countries with which the United States has the largest trade deficits and which impose other trade barriers, effective April 5 and April 9, respectively.

A WCEY Alert summarizing the announcement is available here.

Administration officials have been tamping down concerns about the tariffs and highlighting the potential revenue increase that could cover President Trump's tax cut proposals, including no tax on tip income. Asked in an April 2 CNN interview whether President Trump would entertain countries' attempts to negotiate down the level of tariffs, Treasury Secretary Scott Bessent said, "I think the mind-set is, 'Let's just see where we are' and then we will see how President Trump feels about all this … I think the real thing is going to be that he's going to gauge the tariff level by — it won't be necessarily the calls from the leaders. It's going to be the calls from industry saying, 'OK, how can we get these off?' And he's going to say, you can get it off. Bring your factory to the U.S."

Asked about the potential response to foreign retaliatory measures, Sec. Bessent said, "One of the messages that I'd like to get out tonight is, 'Everybody sit back, take a deep breath, don't immediately retaliate. Let's see where this goes, because, if you retaliate, that's how we get escalation.'" He said, "If we are thinking about a 10% global tariff, and let's assume that we import about $3 trillion a year, so that's $300 billion, and that's a substantial revenue raiser that could then be used for working Americans on no tax on tips, no tax on Social Security, no tax on overtime. And for those buying autos, they can reduce their bills because interest on American-made cars will be tax-deductible."

In an April 3 interview, Commerce Secretary Howard Lutnick said, "I don't think there's any chance that President Trump's going to back off his tariffs. This is the reordering of global trade, right? That's what's going to happen. But the world should stop exploiting the United States of America. Let our farmers sell their products. Let our ranchers sell their products."

Treasury — The Senate Finance Committee has set a hearing to consider the nominations of William Kimmitt to be Under Secretary of Commerce for International Trade and Ken Kies to be an Assistant Secretary of the Treasury (Tax Policy) for Thursday, April 10 at 10 a.m.

Health — The Senate April 3 voted 53-45 along party lines to confirm Dr. Mehmet Oz to head the Centers for Medicare & Medicaid Services (CMS).

Bill intros — Bill introductions of interest April 1-2 include:

• S. 1219, Senator Bernie Moreno (R-OH), to allow a deduction for qualified automobile interest
• S. 1229, Senator Paul, to repeal the clean vehicle credit
• S. 1248, Senator Markwayne Mullin (R-OK), to require the Center for Medicare and Medicaid Innovation to test a model to improve access to specialty health services for certain Medicare and Medicaid beneficiaries
• S. 1252/H.R. 2596, Senator Thom Tillis (R-NC) and Rep. Brian Fitzpatrick (R-PA), to promote the increased use of renewable natural gas, to reduce greenhouse gas emissions and other harmful transportation-related emissions that contribute to poor air quality, and to increase job creation and economic opportunity throughout the United States

Today, Friday, April 4, from 12:00-1:00 p.m. is the EY Webcast, "What companies can do to navigate new reciprocal tariffs."