Trump calls for permanent tax cuts

Kent Nishimura/Bloomberg

In his first address to a joint session of Congress during his second term, President Donald Trump on Tuesday called for making income tax cuts permanent and pitched additional tax priorities that will add to the cost of the tax package lawmakers are hoping to hammer out in the next few months.

"We're seeking permanent income tax cuts all across the board. And to get urgently needed relief to Americans hit especially hard by inflation, I'm calling for no tax on tips, no tax on overtime and no tax on Social Security benefits for our great seniors," Trump said.

The way to "deliver the greatest economy in history is for this Congress to pass tax cuts for everybody," he said.

Trump's call for making the income tax cuts in the 2017 Tax Cuts and Jobs Act permanent supports the Senate's position on tax reform. Senate GOP leaders have said they want to make the TCJA provisions, many of which expire at the end of the year, permanent — a move that would likely require an untested scoring method called current policy baseline. That would allow lawmakers to zero out the cost.

The House's newly passed budget resolution appears to rely on the more traditional current law baseline. The bill allows up to $4.5 trillion of tax cuts, a figure that even House lawmakers say will barely cover the cost of extending the TCJA, let alone Trump's other priorities such as no taxes on Social Security.

For the municipal bond market, the tax package's price tag is important as lawmakers looking for revenue raisers are more likely to target the municipal bond tax exemption.

During the 100-minute speech, Trump chided Democratic lawmakers, saying he was expecting their support on the tax bill. "I'm sure you're going to vote for these tax cuts because if not I don't think the people will ever vote you into office," he said.

The president called for eliminating the electric vehicle mandate imposed by President Joe Biden — part of a larger fight over expected efforts to claw back federal EV funds to states and local governments — and called for Congress to eliminate the bipartisan CHIPS and Science Act that invests in climate and technology.

"Your CHIPS Act is a horrible, horrible thing," he said.

Republican leaders are expected to claw back funding in Biden's Inflation Reduction Act, with House Speaker Mike Johnson, R-La., saying they would take apart the law with something "between a scalpel and a sledgehammer." They're expected to try to rescind $80 billion for the Internal Revenue Service and EV tax credits that total $393 billion over 10 years.

Trump also touted savings that would come from billionaire Elon Musk's advisory Department of Government Efficiency, which is digging into agency budgets looking for cuts.