Senate advances tax bill with resolution, House queues up vote

Allison Robbert/Bloomberg

The U.S. House of Representatives is expected as soon as Wednesday to take up a fiscal 2025 budget resolution, passed by the Senate early Saturday, that paves the way for a sweeping tax bill closely watched by the municipal market.

House leaders will first need to overcome opposition from conservative lawmakers who immediately criticized the Senate measure as a watered-down version of the original House bill.

A joint House-Senate budget resolution will outline the size of tax cuts, spending reductions, debt ceiling and deficit in the massive tax package, and enable the filibuster-proof reconciliation process that allows Republicans to pass President Donald Trump's legislative agenda with a simple majority.

The GOP plans to use reconciliation to extend the Tax Cuts and Jobs Act, enact Trump's campaign promises like no taxes on tips, and cut federal spending. For the municipal market, the biggest threat comes from potential limits to the municipal bond tax exemption as lawmakers look to offset costs.

The House passed its budget blueprint late February.

The Senate version calls for only $4 billion floor in cuts, compared to the House's minimum $1.5 trillion. Unlike the House, the Senate relies on so-called current policy baseline model, which would zero out the costs of extending the TCJA and allows them to avoid offsets.

The Senate version overall allows for $2 trillion deficit increase over 10 years, but the actual figure is closer to $5.7 trillion due to the use of the current baseline policy and the actual cost of extending the TCJA, according to the Bipartisan Policy Center. That compares to the House ceiling of $4.5 trillion.

The Senate measure also would raise the debt ceiling by up to $5 trillion, which is $1 trillion more than the House.

"Tonight, the Senate took one small step toward reconciliation and one giant leap toward making the tax cuts permanent, securing the border, providing much-needed help for the military and finally cutting wasteful Washington spending," Senate Budget Chair Lindsey Graham, R-S.C., said in a statement after the Senate passed the bill.

The resolution now heads back to the House, where it could land on the floor by Wednesday. But several fiscal conservatives have already said they won't vote for the measure. The narrow GOP majority means leaders can lose only three votes if all lawmakers are in attendance.

Speaker Mike Johnson, R-La., and other House leaders sent a "Dear Colleague" letter Saturday urging lawmakers to pass the bill.

"We have and will continue to make it clear in all discussions with the Senate and the White House that —in order to secure House passage — the final reconciliation bill must include historic spending reductions while protecting essential programs," the letter said. "With the debt limit X-date approaching, border security resources diminishing, markets unsettled, and the largest tax increase on working families looming, time is of the essence. As President Trump said, "Every Republican, House and Senate, must UNIFY."

House Budget Chair Jodey Arrington, R-Texas, was among those who balked at the Senate version, calling the changes  "unserious and disappointing." The current policy baseline, Arrington said, "sets a dangerous precedent by direct scoring tax policy without including enforceable offsets." But he added that he's "committed" to working with the Senate and Trump.

As the House tries to usher through the budget resolution, House Ways and Means Committee Republicans are set to meet Monday on the tax bill as well as Senate Finance Committee Republicans, according to media reports.