Update on Reconciliation
Although the Senate was the first horse out of the barn on a budget resolution, the House has gotten the tangible process going by passing their budget resolution for the Big, Beautiful Bill.
By a vote of 217-215, with one Republican voting with the Democrats, Speaker Mike Johnson continued his winning streak on pivotal votes and moved closer to passing a massive reconciliation bill in the House. Now let’s keep everything in perspective as passing the resolution does not mean the House Republican conference is in lock-step on a final product. There is a lot of dissent in the conference around the size of the budget cuts ($2 trillion) in the resolution, the amount of revenue for the tax bill ($4.5 trillion), and whether the Tax Cuts and Jobs Act provisions can be made permanent. And when we say dissent, we mean a real tug of war on all of the above.
On the budget cuts, moderate Members are adamant that cuts to Medicaid and Medicare be off the table, a demand President Trump has made as well. On the tax bill, the $4.5 trillion allocated in the resolution does not allow for the TCJA cuts to be made permanent and leaves no room for President Trump and moderates priorities like increasing the state and local taxes cap (SALT), eliminating taxes on tips and of course our housing agenda, which has strong bipartisan support.
Following passage of the resolution, the hard work begins in the House. The committee’s charged with finding savings will have to come up with the $2 trillion in revenue cuts called for in the resolution. This is when the rubber meets the road and will show Members exactly what might be cut to produce the revenue to offset the spending in the bill.
On the tax side, Ways and Means Chairman Jason Smith (R-MA) will now try to fit the chambers and President Trump’s tax priorities into the $4.5 trillion the resolution provides. As we stated earlier, this number does not allow for the TCJA cuts to be made permanent, and it is possible that the Chairman, as his predecessor did in 2017, extends the tax cuts for a period of time less than the 10-year budget window. Doing this may also allow him to include other tax priorities mentioned above, like the LIHTC. As a point of information, all tax bills must originate in the House, so it is likely Chairman Smith and Finance Committee Chairman Mike Crapo (R-ID) will be in close contact as the process works its way through the Ways and Means Committee. We also continue to push our LIHTC agenda with both chairmen and the tax committee staffs.
Although we have cautioned against saying anything is impossible in Washington, the likelihood that the House budget resolution makes it through the reconciliation process is, at best, unlikely. The Senate has a much different perspective on how to advance the reconciliation bill. They are going to push for the TCJA to count as the current baseline, meaning the cost of renewing the current provisions should be zero as they are already law. If they can prevail with this assumption with the Senate parliamentarian, they will have significantly more room on the tax side than what is in the House budget resolution. They will still have to come up with cost savings, but their targets may be different than those the House is going to consider. As reconciliation is a Senate process, if the Senate can come up with a package that includes renewing the TCJA, they would then negotiate with the House on a single bill that can get 218 votes in the House and 51 votes in the Senate.
As for the LIHTC, the next version of the Affordable Housing Credit Improvement Act is almost ready for reintroduction in early March. We and our industry colleagues are already meeting with Members of Congress to get them on board as original cosponsors, and we ask for your assistance with this. We need to have very significant bipartisan support for the AHCIA so that our leads in the House and Senate can make the case for the LIHTC’s inclusion in the tax bill. Please continue to reach out to Members of Congress from the communities in which you provide housing and ask them to support the AHCIA. They may contact Greg Warren in Congressman LaHood’s (R-IL) office or Victoria Honard in Congresswoman DelBene’s (D-WA) office in the House and Jessica Helmers in Senator Young’s (R-IN) office or John Draxler in Senator Cantwell’s (D-WA) office to sign-on.
Thank you for your continued support and efforts.