Current State of Play
On Tuesday, February 25, the House of Representatives narrowly approved a fiscal year (FY) 2025 budget resolution by a 217-215 vote. This resolution directs the House Ways and Means Committee to approve net tax cuts of $4.5 trillion over 10 years. However, under the House’s one-bill approach to budget reconciliation, these tax cuts are contingent on achieving at least $2 trillion in federal spending cuts—a higher threshold than the required $1.5 trillion minimum for overall spending reductions. Additionally, the resolution proposes a $4 trillion increase in the federal debt ceiling, currently set at $36.1 trillion.
By contrast, on February 20, the Senate passed a “skinny” FY 2025 budget resolution in a 52-48 vote. The Senate resolution does not include tax reconciliation instructions but instead focuses on border and defense spending, domestic energy production, and unspecified spending cuts. Unlike the House’s one-bill approach, the Senate has opted for a two-step strategy, deferring tax policy changes and additional spending cuts to a future FY 2026 budget reconciliation process.
A budget resolution does not require the president’s signature, but for Congress to unlock budget reconciliation—a process that allows legislation to pass the Senate with a simple majority vote (51 votes) instead of the usual 60-vote threshold—both chambers must adopt an identical resolution. Now, House and Senate leaders must negotiate a final version, either through a formal conference committee or by exchanging amendments between chambers.
Why it Matters
The House Republican leadership’s success in advancing their one-bill strategy for FY 2025 budget reconciliation could fast-track key policy priorities, including extending expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and enacting other elements of President Trump’s legislative agenda. The battle over budget reconciliation will shape tax and spending policy for years to come - all of which will ultimately impact American business, investment, and innovation.