House advances Trump tax plan

Kent Nishimura/Bloomberg

The U.S. House of Representatives late Tuesday passed a budget resolution that paves the way for a sweeping tax reform package that's being closely tracked by the municipal market.

"House Republicans moved Congress closer to delivering on President Trump's full America First agenda, not just parts of it," House Speaker Mike Johnson, R-La., said after the vote. "We're going to celebrate tonight, and we'll roll up our sleeves and get right back in the morning."

The final vote of 217-215 shows that Republicans are able to pass major bills with their razor-thin majority despite intraparty disputes as they now head into the budget reconciliation process. The GOP has a 218-215 majority in the House. Kentucky Rep. Thomas Massie was the lone Republican hold out.

The vote follows weeks of intense negotiations among House leaders and marks a crucial victory for Johnson to give President Donald Trump his "one big beautiful bill." The budget framework calls for $4.5 trillion in tax cuts by extending the 2017 Tax Cuts and Jobs Act, Trump's signature bill in his first term. It sets a goal of cutting $2 trillion — Medicaid is expected to be a major target — and raises the debt ceiling by $4 trillion.

The vote sticks to Johnson's ambitious schedule to pass a single reconciliation bill by early May.

The stakes are high for the municipal bond market, which is watching closely for any attempts to trim or eliminate the tax exemption on municipal bond interest as lawmakers look for revenue raisers to offset the cost of the reconciliation bill. The Congressional Budget Office has pegged the cost of the TCJA extension at $4.7 trillion.

The House has already named the elimination of the tax exemption as a possibility, and the muni industry is lobbying lawmakers to preserve the market's signature provision.

A final reconciliation bill is also likely to tackle the long debate around the state and local tax deduction cap. It's an important issue for high-tax states like New York and California, which believe the cap reduces their financial flexibility.

"From the time I took office I made clear lifting the cap on SALT was my top priority," said Rep. Mike Lawler, R-NY, in a post on X after the vote. "This bill will allow us to do that."

The House next needs to negotiate a budget resolution with Senate Republicans, who last week passed their own $340 billion budget resolution that does not include tax reform.

Senate leaders want to make the TCJA extension permanent, using different budget math than the House, and Senate Budget Committee Chair Lindsey Graham, R-S.C., has called the House's $4.5 trillion for cuts "a nonstarter."

If the two chambers are able to reach an agreement, GOP leaders will need to gather enough votes for the conference bill and then again for a final reconciliation tax package.

Meanwhile, Congress will need to act on a separate measure to avoid a government shutdown when spending runs out on March 14. Top Republicans, including appropriators, are set to meet Wednesday to talk about plans going forward, according to CQ.

Punchbowl News reported that Republicans, including tax committee chairs from both chambers, will meet with Treasury Secretary Scott Bessent and other Trump officials at the White House Wednesday to talk tax policy.