Senate Republicans have unveiled their compromise budget resolution, a critical step in advancing President Donald Trump’s legislative agenda. Republicans are attempting to use budget reconciliation, a fast-track process that will not require votes from Democrats, to pass a sweeping bill that includes tax reform, spending cuts, border and defense enhancements and changes to energy policy.
Comparing the Senate and House Budget Resolutions
The Senate’s version of the budget resolution provides the upper chamber with significant flexibility, while leaving most of the House-passed bill’s instructions in place. The House version mandated $1.5 trillion in deficit reduction, all allocated to specific committees, but requires $2 trillion of reductions to unlock the full $4.5 trillion in spending cuts.
The Senate’s version sets a non-binding goal of $2 trillion of deficit reduction “through reconciliation, executive action, or rescissions by Congress and the President.” The Senate committees are only required to cut a combined $4 billion, leaving additional reductions to be determined down the line.
The Senate version also uses a current-policy baseline, which is discussed in more detail below.
|
House |
Senate |
|
|
Tax Provisions |
Allows for a $4 trillion net reduction in tax revenue but increases proportionately to the extent non-tax spending cuts exceed $1.5 trillion |
Allows for an extension of current Tax Cuts and Jobs Act (TJCA) provisions (presumes a $0 cost with current policy baseline) plus a $1.5 trillion net reduction in tax revenue* |
|
Non-Tax Spending Cuts |
Requires $1.5 trillion (allocated by House committee) in cuts but has a goal of $2 trillion |
Leaves House instructions untouched. Only requires $4 billion in cuts (allocated by Senate committee) but has a non-binding goal of $2 trillion via a myriad of mechanisms |
|
Debt Ceiling |
Increases the debt ceiling by $4 trillion |
Increases the debt ceiling by $5 trillion (which is expected to last through the 2026 midterms) |
|
Baseline |
Utilizes a current law baseline |
Utilizes a current policy baseline |
|
Other Items |
Increases defense spending by $100 billion and Homeland Security by $90 billion |
Increases defense spending by $150 billion and Homeland Security by $175 billion |
*Initial total cost estimate of $5.3 trillion per Senate Republicans ($1.5 trillion plus $3.8 trillion for 10 years of TCJA extensions). However, on April 3, 2025, the Congressional Business Office (CBO) released updated scores that change the Senate's estimate to $6.1 trillion ($1.5 trillion plus $4.6 trillion for 11 years of TCJA extensions).
Using a Unique Approach
The Senate’s approach of passing a budget resolution with reconciliation instructions to House and Senate committees that are not in alignment is novel. This proposal provides policymakers with some wiggle room now by deferring many of the difficult policy decisions to the back end of the reconciliation process.
Current Policy Baseline
Republicans are also pursuing the use of a current policy baseline — a first for a reconciliation bill.
Baselines are used to estimate the cost of new legislation. Typically, legislation uses a current law baseline, meaning the cost of a proposal is compared against current law, including any expiring provisions. A current policy baseline assumes that a continuation of current policy, even if it is set to expire, has no cost.
Senate leadership believes they do not need a ruling from the Senate parliamentarian to utilize a current policy baseline in the budget framework; rather, they assert the decision belongs to the Senate Budget Committee Chair Lindsey Graham (R-SC).
Moving forward without a ruling or indication from the parliamentarian is a risky endeavor, as it could be challenged by Democrats. However, the use of this scoring tactic is the only way to ensure current Tax Cuts and Jobs Act (TCJA) provisions are extended permanently, which is a red-line item for several Senate Republicans.
The CBO’s latest estimate issued on April 3, 2025, found that an 11-year extension of the TCJA would reduce tax revenue by $5.5 trillion — approximately $4.6 trillion of increases in the deficit plus $900 billion in interest payments when compared to current law.
The use of a current policy baseline assumes the continuation of the TCJA’s current policies has a cost of $0. The additional $1.5 trillion in tax cuts outlined in the Senate framework is for other tax priorities, including the trio of business provisions that have already changed or expired.
|
Trio of Business Provisions Not Included in Current Policy Baseline |
|
Business Interest Expense Calculation (Sec. 163(j)) |
|
Expensing of Domestic R&E Expenditures (Sec. 174) |
|
Bonus Depreciation (Sec. 168(k)) |
Next Steps in the Reconciliation Process
The reconciliation process begins when the House and Senate adopt identical budget resolutions. This allows committees to develop specific legislation that will be packaged into a comprehensive bill. If Senate Republicans can pass their proposal, it will head back to the House for consideration. Once both chambers agree and pass the same budget resolution, committees can begin drafting recommendations for revenue and spending changes.
Find more detail on reconciliation in Tracking Tax Reform: The Reconciliation Process.
Remaining Questions
The first question is whether this package can pass both the Senate and House. Deficit hawks in both chambers, particularly in the House, have publicly expressed their concern with the net cost of the package. Even if the Senate’s proposal advances, the framework defers most of the difficult decisions, including:
- Spending Cuts — What level of spending cuts will be needed to secure a majority in both the House and the Senate? What will those spending cuts entail? Will changes to Medicaid and SNAP be necessary?
- Tax Cuts — Which of President Trump’s tax priorities, aside from extending current TCJA provisions, will be included in the bill?
- TCJA Tweaks — How will the TCJA’s expiring provisions be changed? Since each provision in a reconciliation bill must have a budgetary impact, extending the TCJA provisions under a current policy baseline will require adjustments to all of the provisions.
- Three Business Provisions — Alterations to the trio of business provisions would not be cost-free under a current policy baseline. Which of these will be restored and for how long?
- Revenue Raisers — How many revenue raisers will be included to make room for tax priorities? What provisions will be included?
Passage of the budget resolution does not guarantee a smooth path to enacting a reconciliation bill. Republicans are working with narrow margins in both chambers, which provides each individual policymaker a significant amount of influence. Given the concerns of fiscal hawks over the ever-growing national debt and of more moderate members over cuts to social safety net programs, negotiations could prove challenging. Ultimately, policymakers will need to craft a reconciliation bill that will garner the support of nearly every Republican.
Potential Timing
Momentum for Republicans’ budget legislation has been building over this congressional work period. While Speaker Johnson (R-LA) continues to push for a finalized bill by Memorial Day, that timeline remains ambitious. Ultimately, Republicans must pass their bill by September 30, 2025, to use a fiscal year (FY) 2025 budget resolution; a delay beyond that date would require a new FY 2026 budget resolution.
Your Guide Forward
As Congress navigates upcoming tax reform, Cherry Bekaert’s tax policy team will stay on top of the latest updates to bring you developments and insights.
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