Next week is shaping up to be a high-stakes showdown over competing budget plans. House Republicans, led by Speaker Mike Johnson (R-La.), are scrambling to finalize their one-bill proposal, with details expected Monday. Meanwhile, Senate Budget Chair Lindsey Graham (R-S.C.) is pushing ahead with a two-bill approach, with key GOP senators set to discuss the strategy with President Donald Trump at Mar-a-Lago this evening. Graham’s budget resolution includes $150 billion for defense, another $150 billion for border security and energy policy changes. This amount would be fully offset. House proposals aim to extend the 2017 tax cuts. One of the biggest sticking points for House Republicans has been the level of spending cuts. House GOP leadership had initially proposed $500 billion to $1 trillion, but conservative hardliners have been pushing for at least $2 trillion or more in spending reductions to maintain budget neutrality. There reportedly is consensus that they will need to cut more than $1 trillion in order to get conservative hardliners on board. House Budget Committee action is tentatively set for Tuesday but could slip later in the week.
Of note: Republicans agree that Trump’s 2017 tax cuts should be permanently extended. Trump also laid out several other tax priorities he wants to see in the package, including eliminating taxes on tips, Social Security benefits and overtime pay. And Trump threw in new tax priorities like getting rid of sports team owners’ tax breaks.
Trump told Republican lawmakers he wants to eliminate the carried interest tax break, a long-standing benefit for private equity fund managers and venture capitalists. His goal is to use the revenue from this change to help offset a multi-trillion-dollar tax cut that Republicans aim to pass before the end of the year. The carried interest loophole allows fund managers to pay lower capital gains tax rates (20%) on their earnings rather than the higher income tax rate (37%). Given past Republican resistance, it remains unclear whether he will succeed this time.
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