Top Senate Budget Committee members announced an agreement last week to write a budget that accommodates large tax cuts.
The declined to publicly state a number, but reports indicate it could be as high as $1.5 trillion. The budget’s approaches to taxes will be key for reform. Democrats can generally block any bill in the Senate that doesn’t receive 60 votes. Republicans can use reconciliation instructions in a budget resolution to avoid 60-vote procedural hurdles, but the process comes with many restrictions.
First, reconciliation instructions must set a revenue target upfront. Republican Budget Committee members did not indicate whether their tax-cut agreement simply reserved space in the budget for aspirational tax cuts, or whether they planned to specifically write reconciliation instructions that would provide for such a large revenue loss. Even with such reconciliation instructions, they would face challenges.
Reconciliation allows revenue losses only within the budget window. Reconciliation bills still generally cannot lose revenue outside the 10-year budget window. To accommodate this, Republicans would have to sunset their $1.5 trillion tax cut within 10 years, extend the budget window beyond 10 years, or find another way to break or bend the rules. Many of these decisions must be locked down by the budget proposal, so Republicans will have to make major decision on their approach well before they begin considering tax reform.
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