U.S. Congressional Update

The United States Congress remains focused on reconciliation, the special process by which the House of Representative and Senate can pass major tax and spending legislation with a simple majority vote. For most legislation, the Senate effectively requires 60 votes to break a filibuster.

Most of the action on reconciliation is currently taking place in the House.  Since the passage back in April of a fiscal year 2026 budget resolution – which is required to “unlock” the reconciliation process – all of the relevant House committees have “marked up” pieces of the reconciliation package that are in their respective jurisdictions. The most consequential mark-ups took place earlier this week – in the Ways and Means, Energy and Commerce, and Agriculture Committees.

The Ways and Means Committee has jurisdiction over the tax code and is a central player in advancing the centerpiece of the Republican agenda – extending the Trump tax cuts initially enacted in late 2017.

The Committee’s work has been complicated by a seemingly minor issue called the State and Local Tax Deduction, or SALT. As the name implies, SALT allows taxpayers to deduct the cost of state and local taxes from their federal income taxes. This is particularly important for taxpayers in states with high property values and/or high property taxes, including New York, New Jersey, and California. The 2017 tax bill capped the previously unlimited SALT deduction at $10,000, and Republican members in swing districts in those three states consider raising the cap a make-or-break issue. The SALT issue was not resolved in the Committee markup, and negotiations are ongoing between Republican leadership and key members.

Under the budget resolution, the Energy and Commerce Committee is required to cut $880 billion in mandatory spending, and most of that comes from changes to the Medicaid program, which funds health care for low income and disabled Americans. According to the nonpartisan Congressional Budget Office, these cuts could result in 8.6 million Americans losing their health insurance. Moderate House Republicans had vowed to resist massive cuts to the Medicaid program but apparently gave their blessing to the Committee’s approach. At the same time, there are indications that some conservative Republicans don’t believe these cuts go far enough.

The third key markup this week was in the Agriculture Committee, where the focus was on cutting about $300 billion from the Supplemental Nutrition Assistance Program, the nation’s largest anti-hunger program.  According to some estimates, this will put about 11 million people, including four million children and 500,000 elderly disabled at risk of losing at least some of their food assistance.

Now that all the relevant Congressional committees have marked up their respective pieces of reconciliation, the Budget Committee will cobble them all together in “one big, beautiful bill.” The stated goal of the Republican leadership is to bring the reconciliation bill to the Rules Committee early next week where additional changes may be made, including a possible resolution of the SALT issue. From there, it will go to the House floor, and we will find out if Republicans have the votes to pass this massive piece of legislation with only a very slim majority.

If and when the bill passes the House, it will then go to the Senate for consideration.  Senate Republicans have already said they plan to make some changes to the legislation.  How long will it take Republicans in both bodies be able to sort out their differences and agree on a final product?  One driving factor is the absolute necessity of raising the debt limit – which is included in the reconciliation bill – before the so-called “X-date” on which the U.S. would default on its obligations. The Treasury Department recently announced that date will arrive in August, so Congress has a very strong incentive to pass reconciliation prior to its traditional August recess.

Stay tuned.