The Hunt for Revenue to Offset Tax Cuts

Republican budget hawks remain very concerned about the deficit effect of a reconciliation bill.  Rep. Roy (R-TX) warned last week that he will push to be sure that the party does not rely on scoring gimmicks to claim that the package is deficit-neutral.  But Republican leadership has refused to commit to a deficit-neutral (let alone deficit-reducing) reconciliation package, noting concerns with revenue analyses produced by congressional scorekeepers.  When asked about his preferred revenue offsets in last week’s meeting with Senate Republicans, President-elect Trump referenced his proposal to implement higher tariffs.  Reportedly, Sen. Paul (R-KY) pushed back on that idea.  It is safe to assume that other Republicans also would object to counting revenue from executive action on tariffs to score the 10-year budget impact of a reconciliation package.  Last week, Elon Musk said that while DOGE will target $2 billion in federal spending cuts, it probably will identify only about half that amount.

The Speaker and House Budget Committee Chairman Arrington (R-TX) have started floating a menu of possible spending cuts totaling $5.3 to $5.7 trillion over ten years.  The list includes the following proposals:

• Repeal of major Biden administration health rules ($420 billion):  this could include ending a rule requiring minimum staffing levels at nursing homes
• Strengthening Medicare for seniors ($479 billion):  this includes provisions relating to Medicare site-neutrality and uncompensated care, along with a mandatory sequester extension for Medicare BCA
• Making Medicaid work for the most vulnerable ($2.3 trillion):  this includes proposals to institute per-capita caps on Medicaid for states, equalize Medicaid payments for able-bodied adults with those of traditional Medicaid enrollment, limit Medicaid provider taxes, implement a lower federal medical assistance percentage (FMAP) floor and special FMAP treatment for D.C., repeal the American Rescue Plan’s FMAP incentive, and introduce Medicaid work requirements
• Reimagining the Affordable Care Act (ACA) ($151 billion):  this includes recapture of excess premium tax credits (which are scheduled to expire at the end of the year), a limitation on health program eligibility based on citizenship status, repeal of the Prevention Public Health Fund, and unspecified cost sharing reductions
• Ending Cradle-to-Grave Dependence ($347 billion):  this contemplates reinstatement of the Trump-era public charge rule, a 10% reduction to Temporary Assistance for Needy Families (TANF), elimination of the TANF contingency fund, reformation of the Thrifty Food Plan, elimination of the Social Services Block Grant, and reforms to the Supplemental Nutrition Assistance Program
• Reversing Biden Climate Policies ($468 billion):  this includes proposals to discontinue green energy provisions enacted as part of the 2021 Bipartisan Infrastructure Law, repeal of the EV mandate, and repeal green energy grants enacted as part of the 2022 Inflation Reduction Act
• Other ($917 billion - $1 trillion):  including proposals to end the student loan bailout, rescind all unspent COVID money, open FCC spectrum auctions, repeal the Orderly Liquidation Authority authorized by the Dodd-Frank Act, mandate contribution increases to the Federal Employee Retirement System and implement other reforms to federal employee benefits, restrict emergency spending to recent averages, and eliminate the Thrift Savings Plan G Fund subsidy
• Tax Offsets ($227-527 billion):  this proposes repeal of green energy tax credits (“depending on political viability”) and amendment of the Child Tax Credit to deny eligibility to families who lack a Social Security Number

Reportedly, at a House Republican presentation last week, Arrington “mistakenly” included a proposal for an increase to the corporate rate.  He also has floated imposing a cap on corporate SALT deductions as another potential revenue raiser.  Some of these proposals are controversial and unlikely to garner sufficient support among the narrow Republican majority.