Top Republicans are offering a variety of ideas to cover the costs of massive tax cuts and immigration enforcement legislation. They could impose a 10% tariff on all imports, bringing in about $1.9 trillion in revenue. They could save $100 billion by establishing new work requirements for Medicaid recipients.
According to a 50-page list of options recently distributed by the House Budget Committee, they calculated that raising taxes on people who can use free gyms in their offices could generate $20 billion.
The bigger challenge for Republican leaders will be trying to figure out what can get through Congress and be signed by President Trump. With slim margins in both houses, they are trying to find the right mix of policy changes that could offset some of the costs of Mr. Trump’s most expensive proposals, while appeasing spending hardliners who worry about rising government debt. Support more centrist members who don’t like cutting popular programs.
House Republicans gathered at the Capitol Wednesday to discuss a variety of options on the table.
Complicating their mission are political challenges. Many Republicans are considering targeted programs to help low-income Americans, all in service of paying for extensions of tax cuts that disproportionately benefit the wealthy.
The overarching goal is to use a process called reconciliation to push through big legislation to cut taxes and crack down on immigration. This would allow Republican leaders to avoid a filibuster and pass legislation through the Senate with a simple majority even if all Democrats oppose it. .
Many anti-spending Republicans have said they cannot support a bill that would significantly increase the national debt. But most of the major policies President Trump wants to include in the bill are extremely costly. The tax cut extension he signed into law in 2017 alone is expected to cost $5 trillion.
This has led Republicans to look for ways to offset these costs. The budget panel’s menu of possibilities includes everything from major clawbacks to low-hanging fruit on current policies. Among other proposals: repeal a key health care subsidy program established by the Affordable Care Act, set limits on Medicaid funding, and end a policy that exempts employer-provided meals and lodging taxes.
Let’s take a look at what Republicans are considering.
Long-standing conservative goals, such as cutting back on Medicaid;
Republicans have long sought to scale back Medicare and Medicaid, the government programs for the elderly and the poor, and the Budget Committee’s list lists a variety of options for doing so, including lowering federal Medicaid payment rates and setting work requirements for program recipients. there is.
One option the committee has raised is to try to weaken the Affordable Care Act’s Medicaid expansion, which has led to a surge in enrollment in the program. This reduces the share of Medicaid costs paid by the federal government, increasing the burden on states.
Another item on the list is imposing work requirements for Medicaid recipients on able-bodied adults without dependents and exemptions for pregnant women, students and primary caregivers of dependents. Work requirements are expected to cause 600,000 people to lose coverage, cutting federal spending by at least $100 billion over the next decade, according to estimates from the Congressional Budget Office.
House Budget Committee aides said Joseph R. Biden Jr. would push for lower health costs. They estimated that up to $800 billion could be recovered by rolling back clean energy efforts, including repealing tax credits created by the former president’s landmark legislation, the Inflation Reduction Act. , reduce greenhouse gas emissions and increase taxes on corporations. The rollback also includes the Biden administration repealing climate regulations designed to ensure that most new cars and light trucks sold in the U.S. will be all-electric or hybrid by 2032.
But undoing such a massive chunk of the inflation reduction law could be politically risky. Some far-right lawmakers have argued that Republicans should repeal the law entirely, but others, especially those who run large clean energy companies in their districts or states, have implored congressional leaders to keep parts of the law in place. Last year, 18 House Republicans sent a letter to Speaker Mike Johnson warning that “a complete repeal would create a worst-case scenario where we spend billions of taxpayer dollars and get nothing in return.”
Aides who prepared the budget committee cut menu appear to have reflected this in their calculations.
“There are several smaller reform options (starting at $3 billion) that could eliminate smaller portions of these deductions, depending on political will,” the document says. Of course, these options offer much less cost savings and are unlikely to appease the consumer hawks who will need to vote to pass any package.
Dozens of Trims That Can Increase Americans’ Costs
Republicans are also considering a number of proposals that would make small changes to the nation’s fiscal balance but could impose new costs on Americans. Among them are free gyms in the office and new taxes on employer-provided meals and lodging.
The budget panel document also proposed taxing all scholarship and fellowship income that is currently tax-exempt, which is expected to generate about $54 billion in additional federal revenue.
Lucrative but politically difficult options, such as ending the home mortgage deduction
House Republicans’ list includes options that could generate trillions of dollars in savings. But they will likely face nearly insurmountable opposition from lobbyists and some lawmakers.
The proposal includes ending the tax deduction for home mortgage interest, one of the most important parts of the tax code. Republicans limited the deduction in the 2017 tax law, but ending it entirely could save an additional $1 trillion over 10 years, according to a budget panel document. Real estate agents and lawmakers in suburban areas with many homeowners are likely to balk at such a move.
It could also be profitable to tax imports into the United States, a measure that President Trump has often called for. The document lists a 10% tariff on all goods worth nearly $2 trillion as one option, but many Republicans have said they do not believe Trump’s tariffs should become law.
A proposal to tax imports and exempt exports, called the border adjustment plan, could raise $1.2 trillion, according to a House Republican document. Many economists like the idea of taxing goods based on where they are sold rather than where they are produced, but a previous Republican effort to pass a destination-based plan failed in 2017 after businesses rejected it.
The House Republican menu includes several tax increases, including denying businesses the ability to deduct state and local taxes. Business groups are already organizing to address these prospects.
More tax breaks on tips, overtime pay, and more
In addition to extending the last tax cut, Republicans are interested in lowering taxes even further. President Trump campaigned to make several forms of income tax-free, including tips and overtime.
The House Republican documents offer clues as to how Congress might actually access Mr. Trump’s thinking. For example, a proposal not to tax tips would only exempt tips from income tax. This means that tip income is still subject to payroll taxes, which fund Social Security and Medicare.
Framing the offer that way would reduce the amount saved by low-wage tipped workers. It would also preserve the ability to claim full retirement and health care benefits and reduce the overall cost of the tax cut, which is expected to cost $106 billion, according to budget panel documents.
At the same time, not taxing overtime pay could cost up to $750 billion over 10 years, according to the budget panel.
A group of House Republicans, along with President Trump, hope to increase the state and local tax deduction limit to $10,000 as part of the bill. The document estimates that raising the limit to $30,000 for couples and $15,000 for individuals would cost $500 billion, and some lawmakers want to increase the limit even further.
President Trump has attempted to lower the corporate tax rate after cutting it to 21% in 2017, and documents show House Republicans are considering lowering the corporate tax rate to 15%.
