There are currently differing approaches between the House of Representatives and the Senate. The Senate has been looking to make one smaller bill to keep the government funded with limited tax provisions and a larger tax package separately whereas the House of Representatives wants to included tax reform in the 2025 budget package.
On February 21, 2025, the Senate passed their budget resolution following their plan of not including any significant tax provisions. On February 25, 2025, the House of Representatives passed their version of a 2025 budget resolution which included $4.5 trillion in Tax Cuts and called for $1.8-$2.0 trillion in cuts in other government spending. As this is only the budget resolution phase, there are no specifics on what these tax cuts would entail – the most pressing priority appears to be extending the 2017 Tax Cuts and Jobs Act provisions set to expire – but there are still many possibilities. At this point, to use an example, the Senate has said “we want to take a vacation in the future” and we will think about where we want to go and budget it in the future, whereas The House of Representatives have said “we want to take a vacation and have budgeted for it costs, but we don’t know where and will need to save elsewhere in order to take it” – both plans are still very much up in the air.
As the House bill is both larger in size and requires deep spending cuts it may be tougher to pass. There are reports that many lawmakers are concerned about what their support may mean in a 2026 midterm election given the cuts needed to make it pass. Further, while there is an agreement on the amount of potential cuts budgeted, certain interests – such as those who want an increased State and Local Tax (SALT) Cap or unlimited deduction – may hold up the bill if their wishes aren’t granted. With a slim House majority there is little room for any internal disagreement.
In other legislative news, the Internal Revenue Service (IRS) experienced, starting on Thursday, February 20th a nearly 6,000-person reduction in force as part of the overall current plans to reduce the headcount in government. Most of these appear to be revenue agents and those involved in examinations as the plan was to have any potential “customer service” facing cuts wait until after the upcoming tax deadlines. So far, we have not experienced any additional hold times or wait times when compared to the past – but this reduction in force is likely to impact that as well as other areas in the future, including taxpayer services.
As we look to March 2025, with funding in place only until March 14, 2025, the budgeting process will be in full swing, which could result either in large scale tax reform if the House resolution is adopted or we could see the Senate resolution moving forward, which would push any tax reform out. As we know more, we will continue to update.
Edward McWilliams, CPA
Partner
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.
