House Passes FY18 Budget Resolution Paving Way for Tax Reform

The House passed the FY18 budget resolution (H. Con. Res. 71) that provides the path forward for tax reform. The House agreed to the version that was passed by the Senate last week.

The FY18 budget resolution allows for an additional $1.5T in annual deficits over the next decade to make way for tax cuts. The resolution includes reconciliation instructions that would allow Republicans to pass future tax reform legislation without the risk of a Democratic filibuster in the Senate. The measure also could allow Republicans to push through plans to open part of Alaska’s Arctic National Wildlife Refuge to oil and gas drilling. And budget reconciliation instruction calls for the Senate Energy and Natural Resources Committee to reduce deficits by at least $1 billion over 10 years, which could be raised through sales of federal leases to oil drilling companies and royalties from any oil or gas produced.

The FY18 budget resolution has no requirement to cut entitlements to pay for the tax cuts, which is something House conservatives had wanted in the budget. In return for their support and vote on the budget, members of the Republican Study Committee were assured by House Speaker Paul D. Ryan (R-WI) that there would be a vote on the House floor next spring on a constitutional amendment requiring a balanced budget, along with deficit-reduction legislation that includes cuts to entitlement programs. House Budget Committee Chairwoman Diane Black (R-TN) said this week that she expects the FY19 budget resolution could propose up to $500B in mandatory spending reductions.

The vote in the House was 216-212 with 20 Republicans voting against the budget. Some Republicans from New York and New Jersey voted against the budget this time as they wanted assurances that the state and local tax (SALT) deduction would not be eliminated as part of a tax code overhaul. Getting rid of the deduction would bring in an additional $1.3T in new tax revenue over the next 10 years.

The House first passed the FY18 budget resolution on October 5 by a vote of 219-206 with 18 Republicans voting against the budget. Ten Republicans voted no both times, so there are combined 28 Republican members who at one point voted no on the FY18 budget resolution. Republicans can only afford to lose 22 votes on tax reform, so this is going to be a difficult balancing act by House Republican leadership to bring some of their members back on board.

Below are the members who voted against the FY18 budget resolution in the House during either the first round or second round of consideration:

Amash (MI)

Blum (IA)

Buck (CO)

Comstock (VA)

Costello (PA)

Dent (PA)

Donovan (NY)

Duncan (TN)

Faso (NY)

Fitzpatrick (PA)

Gaetz (FL)

Jenkins (KS) – member of the House Ways and Means Committee

Jones (NC)

Katko (NY)

King (NY)

Lance (NJ)

LoBiondo (NJ)

MacArthur (NJ)

Massie (KY)

Mast (FL)

McKinley (WV)

Meehan (PA)

Ros-Lehtinen (FL)

Sanford (SC)

Smith (NJ)

Stefanik (NY)

Tenney (NY)

Zeldin (NY)

Bold – the 10 Republicans who voted no both times

House Ways and Means Committee Chairman Kevin Brady (R-TX) announced that the tax overhaul bill will be released on November 1 and that the committee will begin marking up the measure on November 6. The markup is expected to last several days. Speaker Ryan wants to pass a tax overhaul before Thanksgiving.

Chairman Brady expects to have a static score from the Joint Committee on Taxation (JCT) when they begin to mark up the bill. A dynamic score from the JCT isn’t expected until after the markup. The dynamic score is important as Republicans say tax cuts will spur enough new economic growth to create additional revenue that traditional budget scoring rules don’t recognize.

Finally…speaking of taxes, National Economic Council Director Gary Cohn said this week that Congress will have an opportunity to vote on a federal gasoline tax increase as part of an infrastructure bill early next year.

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