At the center of the federal budget debate is a key question: how to account for extending pro-business provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire this year.

Lawmakers face a choice between the “current-law” baseline, which views extending the tax cuts as a $4 trillion cost over 10 years, and the “current-policy” baseline, which does not treat preventing a scheduled tax increase as new government spending.

The U.S. Chamber of Commerce advocates for the latter approach, arguing that making the TCJA cuts permanent would prevent a multi-trillion dollar tax increase on American families and businesses, and that avoiding a scheduled tax increase should not be counted as a new tax cut. Under this approach, only new tax policies or changes to current policy would be considered to have a budgetary impact.

In the House: One-Bill Track

In the House, lawmakers have introduced one comprehensive bill that combines TCJA tax extensions with other GOP policy goals. This proposal includes $4.5 trillion in tax cuts, $1.5 trillion in spending cuts, $300 billion in border and defense spending, and a $4 trillion increase in the debt ceiling for a two-year extension.

Speaker Mike Johnson’s plan is expected to be considered after the President’s Day recess but will require nearly unanimous Republican support to move forward.

In the Senate: Two-Bill Track

Senate Republicans, led by Budget Committee Chairman Lindsey Graham, are pursuing a two-step approach. Their plan would first focus on border security, defense, and energy before addressing the TCJA tax provisions in a later bill.

Graham’s slimmer proposal is designed as a backup, in case House Republicans struggle to advance their broader package. Graham has urged House leaders to consider the Senate’s phased approach if they cannot move their bill quickly.

 U.S. Chamber’s Position

The U.S. Chamber has laid out several reasons to extend the TCJA tax policies and adopt a “current-policy” baseline.

First, a current-policy baseline better reflects reality by measuring tax changes relative to existing policy, not scheduled increases. This prevents mischaracterizing tax changes and gives a more accurate picture of what families and businesses can expect.

This approach would enable Congress to make the TCJA’s temporary provisions permanent. Adopting a current-policy baseline also gives Congress more flexibility to target spending reductions without the pressure of adding to the deficit to extend tax policies.

Next Steps

For tax cuts and other spending priorities to advance through reconciliation – a process that bypasses the Senate filibuster and allows passage with a simple majority in both chambers – the House and Senate must first agree on a budget resolution. The PA Chamber will continue to monitor these developments and their impact on Pennsylvania businesses.