Budget Reconciliation Sets Stage for Tax Reform

Published November 16, 2017

The U.S. House of Representatives approved a resolution affirming the U.S. Senate’s budget resolution setting spending recommendations for Fiscal Year 2018, allowing Congress to use a legislative procedure known as reconciliation to pass tax reform.

The House approved Rep. Diane Black’s (R-TN) amendment to House Concurrent Resolution 71 on October 26, 2017, revising the House budget resolution to mirror the Senate’s version. The resolution included instructions for the Senate Finance Committee, triggering the reconciliation process.

A process created by the Congressional Budget Act of 1974, reconciliation reduces the difficulty of passing tax and spending bills. Reconciliation allows a tax reform bill to bypass the 60-vote requirement for ending Senate debate and going to a vote, instead requiring only a simple majority for Senate passage.

On November 16, the House approved H.R. 1, titled the Tax Cuts and Jobs Act, the bill for which reconciliation was used. The Senate approved the bill on December 2 and sent it to a conference committee to merge the two versions.

Solving Multiple Problems

Justin Bogie, a senior policy analyst for fiscal affairs at The Heritage Foundation, says the streamlined tax bill will help fix the national government’s other fiscal problems, including the federal debt and deficit.

“Tax reform is very important, and it’s certainly one piece of getting the economy moving in the right direction and ramping up economic growth,” Bogie said. “If that happens, then it does help reduce the deficit and the national debt over the long term.”

Possible Spending Cuts?

Bogie says future budget resolutions may include spending reductions.

“The House version of the budget originally had $203 billion in mandatory cuts,” Bogie said. “The Senate version stripped those out. The mandatory cuts should’ve remained in the bill, but there are reports coming out that Republicans are looking to make $400 [billion] to $500 billion in mandatory cuts through reconciliation in 2019.”

Expectations and Expenditures

Jonathan Bydlak, president of the Coalition to Reduce Spending, says spending cuts and tax reform are two sides of the same equation.

“The budget sets expectations, so what they have done is set expectations for higher spending in the future,” Bydlak said. “To get at long-lasting tax reform, it’s really critical that you address expenditures in a way that’s responsible, so that you don’t create the pressure to raise taxes in the future.”