Republicans are starting to sketch out how to translate President-elect Donald J. Trump’s economic agenda into law, putting plans in place to bypass Democrats and approve multiple bills reshaping the nation’s tax and spending policies along party lines.
With total control of Washington, Republicans have the rare — and often fleeting — opportunity to leave a lasting mark on federal policy. Some in the party are hoping to tee up big legislation for early next year and capitalize on Mr. Trump’s first 100 days.
Much of the early planning revolves around the sweeping tax cuts the party passed and Mr. Trump signed into law in 2017, many of which will expire at the end of next year. Key Republicans are holding meetings about how to maneuver a bill extending the tax cuts through the Senate, while others are consulting economists for ideas to offset their roughly $4 trillion cost.
Several questions loom over the Republican effort. They range from how fast the party should move next year to deeper political disagreements over which tax and spending policies to change. The overall cost of the legislation is a central preoccupation at a time of rising deficits. And whatever Republicans put together will most likely become a magnet for other issues the party has prioritized, including immigration.
Here’s what to expect.
A Difficult Process
Most legislation needs a supermajority of 60 votes to pass the Senate. But for bills focused on taxes and spending, lawmakers can turn to a process called budget reconciliation that requires only a regular majority of 51 votes in the Senate.
Reconciliation is a powerful but cumbersome tool. Its rules prevent lawmakers from passing policy changes unrelated to the budget, and lawmakers are only allowed to use reconciliation a limited number of times per year. Republicans could also raise the debt limit through the process.
“We’ll have two bites at the reconciliation apple in the next calendar year,” Representative Jodey Arrington, a Texas Republican and the chairman of the House Budget Committee, told reporters. “And so we’ll have plenty of opportunity to reignite growth through pro-growth policies and include fiscal reforms.”
Republicans are still figuring out how they could split their ambitions into distinct packages of legislation. One option under discussion is to focus an initial bill on extending the expiring tax cuts. Without an extension, popular provisions like lower marginal income rates and a larger standard deduction would end next year, amounting to a tax increase on Mr. Trump’s watch.
Once those provisions are extended, lawmakers could turn to Mr. Trump’s campaign tax promises, like a lower corporate tax rate for American manufacturers as well as broader topics like immigration and spending cuts, and fold those into a second piece of legislation later in the year. One of Mr. Trump’s pledges, no taxes on Social Security, would most likely run afoul of reconciliation’s rules.
“I think there’s going to be a push by Republicans to achieve that big win in the first 100 days, and that will require keeping it simple,” said Brian Riedl, a budget expert whom House Republicans have consulted about their 2025 agenda. “That will mean that some of the Trump changes may be saved for another reconciliation bill later in the year.”
Just focusing on the expiring tax cuts won’t necessarily make for an easy process. Reconciliation requires multiple rounds of voting, with lawmakers forced to commit to a price tag of the legislation, a sensitive issue for Republicans worried about the deficit. Even without an extension of the tax cuts, the annual gap between what the federal government spends and the revenue it collects is expected to widen significantly over the next decade. Some economists see the debate over the tax bill as a potential tipping point for the nation’s fiscal health.
Senate Republicans are in no rush to pass a tax bill early in Mr. Trump’s first year back in office. They expect to take several months and reset the nation’s tax policies in one go. “End of the summer will be the soonest,” Senator James Lankford, Republican of Oklahoma, said.
Sharp Policy Disagreements
However Republicans decide to pursue their agenda next year, they’ll have to resolve several internal policy disagreements. The party will have only a few votes to spare in the House and the Senate, meaning Republicans will need nearly unanimous support to pass legislation.
While Republicans have said they are worried about the deficit, they are also divided on how they could raise revenue to pay for more tax cuts.
Mr. Trump and his team have called for ending President Biden’s clean-energy subsidies next year, like a $7,500 tax credit for purchasing an electric vehicle. But Republicans who represent areas with blossoming clean-energy industries have cautioned against ending all of the tax incentives in the Inflation Reduction Act, often called the I.R.A.
“We need to look at the I.R.A., and instead of taking a sledgehammer to it, taking a scalpel to it,” Representative Buddy Carter, a Georgia Republican, said. “There are some good parts.”
Lobbyists see consumer incentives like the $7,500 electric vehicle subsidy as endangered next year, while Republicans may largely protect manufacturing incentives.
Then there are tariffs, a centerpiece of Mr. Trump’s economic agenda. Congressional Republicans have been studying the possibility of including a broad tariff on all imported goods in reconciliation legislation, according to lawmakers, aides and lobbyists. Enacting such a tariff into law would make it difficult to reverse in the future and provide a stream of money Republicans could count against the cost of tax cuts.
That could still be a difficult vote for many Republicans, particularly those from states that rely on exports and worry about foreign nations closing their markets to American goods in response to tariffs.
“I think it’d be a heavy lift,” Senator Kevin Cramer, Republican of North Dakota, said. “Here’s my fundamental reason: I support tariffs for certain defensive measures and other outcomes. I don’t support them as a means of revenue.”
Trying to Pay for Trump’s Campaign Promises
Republicans want to pass many of the new ideas for cutting taxes that Mr. Trump proposed during the campaign, including eliminating taxes on tips and overtime pay. Turning those simple pledges into inexpensive policies is a challenge, given the overall cost of what Mr. Trump has proposed.
“We’re going to try to make that happen in the Congress,” House Speaker Mike Johnson said in a CNN interview about not taxing tips. “You have got to do the math.”
Mr. Trump also said that he would restore the state and local tax deduction — or SALT — a hugely expensive tax deduction that primarily benefits rich residents of high-tax, blue states like New York, New Jersey and California.
Republicans capped the deduction at $10,000 in 2017 as way to pay for the tax bill. But while Mr. Trump has called for restoring the full benefit, even Republicans from states like New Jersey and New York do not expect the $10,000 cap to disappear. Republicans from states with lower taxes oppose lifting the cap, and removing it entirely could cost roughly $1 trillion over 10 years.
“I don’t think there’s going to be no cap, quite frankly, but I think we can increase the cap,” said Representative Jeff Van Drew, a New Jersey Republican who supports lifting the cap.
Republicans are discussing some additional ways to pay for tax cuts. Mr. Riedl, the budget expert, said curbing corporations’ ability to write off state and local taxes could help cover the cost of restoring the deduction for individuals. During the campaign, Mr. Trump endorsed raising taxes on university endowments. Republicans first imposed a 1.4 percent tax on large university endowments in the 2017 tax law. Several lawmakers have proposed ways to increase taxes on elite schools next year.
Republicans are also looking at funding cuts to safety-net programs like Medicaid, the health care program for low-income Americans. Mr. Arrington, the chairman of the House Budget Committee, suggested that lawmakers could make cuts to Medicaid as part of the tax bill. Republicans on the House Agriculture Committee have also explored trims to food stamps. At the same time, lawmakers may want to increase some spending, particularly on border and immigration enforcement, in party-line legislation next year.
But even as Republicans begin early discussions about what they could pass next year, much of Mr. Trump’s legislative agenda is unclear. His economic team, including the Treasury Secretary, could help set the administration’s tax proposals, for example, and lawmakers said they would be eager to fulfill Mr. Trump’s goals.
“He will get everything he wants,” said Representative Ralph Norman, a South Carolina Republican.
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