House and Senate Pass Competing Budget Resolutions

As previewed in a recent article in the GFOA Newsletter on the path to tax reform, the Senate and House have now each taken the next step towards the budget reconciliation process needed to enact the Administration’s tax, border, defense, and energy priorities. In recent weeks, the respective chambers laid the groundwork to take different approaches to enacting these priorities. On February 21, along a party-line vote the Senate passed their FY 2025 Budget Resolution. This bill sticks to the approach Senate Republican leadership has called for in a two-bill strategy. The first bill would be used to address border security, military spending, and energy. The second bill to be taken up later in 2025 would tackle extending /modifying the 2017 Tax Cuts and Jobs Act.

On February 25, the House (also along a party-line vote) adopted its budget resolution that lumps all the above-mentioned priorities into one package. This is primarily due to the current House dynamic as Speaker Johnson has a very narrow margin and may not have many chances to move major pieces of legislation.

All this means is that in order to unlock the reconciliation process, both chambers must pass identical resolutions. There remains some uncertainty as to which approach is going to win out, but each chamber has its respective challenges that must be accounted for. So, we are still several weeks away from a clear picture on which approach will succeed, and only then will we start to have more clarity on tax reform and what might be included. As a reminder, this is a separate process that does not address the looming deadline of March 14 when the current continuing resolution temporarily funding the government is set to expire. A funding deal is still necessary for the remainder of the current fiscal year and the risk of a shutdown remains.

As it relates to tax reform, for GFOA and the broader state and local finance community, we are on alert for the provisions that may be included in any tax legislation. As previously reported, the tax-exemption for municipal bonds is among a menu of provisions that could be used to pay for the new tax bill. We sincerely appreciate members who have already added projects to our #BuiltByBonds map, but if you have not done so, we encourage you to add your project and access our other municipal bond resources at www.builtbybonds.com. Additionally, feel free to review and utilize our resources on ways you can take action as the tax reform debate ramps up.