OPINION:
The House last week passed, by the bracing margin of 215-214, the One Big Beautiful Bill Act, which includes an extension of the Tax Cuts and Jobs Act of 2017, a handful of additional tax provisions and bits and pieces of other policies, especially the tightening of work requirements associated with Medicaid.
Some of the new tax provisions would phase out some tax credits from the Inflation Reduction Act of 2022 over the next two years. Some would allow folks in high-tax states such as California and New York to deduct as much as $40,000 of their state and local taxes from their federal adjusted gross income.
The legislation now goes to the Senate, which typically has its way with the House and passes pretty much whatever the senators feel like, anticipating that they will eventually present the House with a fait accompli. History certainly bears that out. The Senate usually gets most or all of what it wants with respect to legislation, especially during reconciliation processes.
This time might be different.
First, and perhaps most importantly, President Trump has made it clear that he wants completed legislation on his desk soon. Not surprisingly, his chief interests include a reauthorization of the Tax Cuts and Jobs Act and addressing his promises of no taxes on overtime or tips. Beyond that, there will be limited enthusiasm for the traditional congressional delay.
Second, the simple reality is that the House legislation was the product of negotiations among various factions that were written into law. It will be difficult to upset that particular apple cart and maintain anything near a schedule that allows the president to sign reconciliation legislation before we get deep into the third quarter. That would affect the economy and next year’s appropriations and, most importantly, complicate increasing the debt ceiling, which, as a reminder, the president hates to do.
Third, and perhaps most troublesome for the prospective big spenders in the Senate, both legislative bodies now have legitimate groups of budget hawks. Rep. Chip Roy of Texas, the leader of the fiscal hawks in the House, carried the ball as far as he could. The reality is that the legislation, as passed, would put another $2.3 trillion on the U.S. credit card. Administration officials made some perfunctory attempts to explain that away by saying increased economic growth would solve the problem, but Mr. Roy and his three dozen or so allies were having none of it.
Sens. Ron Johnson, Rand Paul, Mike Lee and Rick Scott have made it clear that they aren’t having any of that, either, and have announced that they won’t vote for the legislation as constructed because of the increased deficit it promises. They are not alone. Like their brethren in the House, they seem to have little fear of the potential presidential retribution. Indeed, Mr. Johnson made that explicit by noting that the president’s anticipated threats to primary recalcitrant senators would not work in the Senate. It helps that the bond market has been sending unmistakable signals that it, too, is concerned about putting a couple of more trillion on the credit card.
From the spending side of the ledger, Sens. Susan M. Collins and Josh Hawley have expressed reservations about the intensity of the reductions in the growth of Medicaid, so their advocacy may very well spend any extra cash that can be found.
In short, the Senate process will likely focus on reducing the amount of taxpayer money spent (or transferred to others via the tax code) or directing more spending to Medicaid. It is unlikely to result in legislation that is more generous to other policies than the House version.
In other words, if you are expecting different results than the House produced on the SALT deductions, the Inflation Reduction Act tax credits or anything else, you may want to adjust your expectations just a bit.
• Michael McKenna is a contributing editor at The Washington Times.
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