Republicans on the House Budget Committee are considering more than 200 potential budget cuts, tax breaks, tariffs and changes to programs like Medicare and Social Security in preparation for their wide-ranging reconciliation bill expected this year, according to a document shared with The Hill.
The smorgasbord of policy options is broken down by committee, and proposals are assigned dollar amounts for how much they would reduce or add to the deficit through the 10-year budget window.
The document includes estimates for President-elect Donald Trump’s across-the-board tariffs, the individual tax breaks he proposed on the campaign trail, changes to the state and local tax (SALT) deduction, changes to the corporate tax rate, and cuts to Democrats’ climate-focused Inflation Reduction Act, among many others.
While many of the tax proposals relate to expirations in the 2017 Trump tax cuts, there’s no mention of the expiring marginal tax rates or standard deduction, suggesting the extensions may be under consideration separately. Making the 2017 tax cuts permanent, which would add $4.6 trillion to the deficit according to the Congressional Budget Office, is a top priority for Republicans.
The Budget Committee document fixes Trump’s general tariff at 10 percent and projects $1.9 trillion in revenue from it over the next decade. Trump recently proposed creating an external revenue service to collect tariff revenues, as distinct from the internal revenue service (IRS).
It also proposes codifying and increasing tariffs on China at a deficit reduction of $100 billion.
The plan lays out multiple options on the SALT deduction cap, which is among the most controversial tax provisions within the Republican conference. The SALT deduction was capped in 2017 at $10,000, much to the aggravation of many blue-state Republicans, along with Democrats.
SALT options include fixing the $10,000 cap in place, increasing it to $15,000, eliminating the income and sales tax portion of it, and eliminating the deduction altogether. If SALT is scrapped entirely, it would shrink the deficit by about $1 trillion. Total U.S. debt stock stands now at around $36 trillion, though about 20 percent of that is money the government effectively owes itself.
The plan considers lowering the corporate tax rate to 20 percent at a cost of $73 billion and to 15 percent at a cost of $522 billion. It also proposes getting rid of IRS enforcement funding awarded by Democrats in 2022 at a cost of $46.6 billion.
Tax cuts proposed by Trump while campaigning are given budgetary estimates, as well. Canceling taxes on tips would cost $106 billion, canceling overtime taxes would cost $750 billion, and creating an auto loan interest deduction would cost $61 billion. The plan also considers eliminating the inheritance tax and doing away with the Inflation Reduction Act’s alternative minimum tax for corporations.
Accountants say they’re expecting quicker moves on tariffs from the incoming administration than they are on broader tax changes.
“Although the expiration of the tax cuts was thought to dominate policy discussions in the first 100 days, we may see another levy tax take center stage: tariffs,” Rema Serafi, vice chair of tax at accounting firm KPMG, wrote in a commentary.
The plan also considers a new border adjustment tax. The tax would bring in $1.2 trillion in revenue over the next ten years.
