House Republicans are pushing for tax cuts but face a tough dilemma—deciding what to trim. They are setting a $4.5 trillion cap on the tax cut package, but even that may not be enough to fulfill all of former President Donald Trump’s promises.
The primary goal is to extend key provisions from the 2017 tax cuts, such as the larger standard deduction and child tax credit, which expire this year. Maintaining these would cost about $4 trillion over the next decade. Additional business tax breaks, including deductions for research and development and business interest expenses, would consume most of the remaining budget, leaving little room for new initiatives.
Trump has proposed several costly measures, including eliminating taxes on tips ($100 billion), overtime pay (at least $250 billion), and Social Security income ($550 billion). He also wants tax breaks for domestic manufacturers. Meanwhile, Republicans from high-tax states are pushing to lift the $10,000 cap on state and local tax deductions, which could add up to $1 trillion to the bill.
To stay within budget, Republicans might repeal clean energy subsidies or opt for short-term extensions of tax cuts, hoping a future Congress will make them permanent. However, short-term fixes can create economic uncertainty and limit growth.
A group of Senate Republicans is urging permanent extensions of the 2017 tax cuts, but reconciliation rules restrict deficit increases beyond 10 years. Some propose changing budget rules to make tax cuts appear cost-neutral, but fiscal conservatives remain skeptical. House Republicans must now balance ambitious tax cuts with fiscal realities, a challenge that could define their legislative success.