How budget reconciliation could shape major legislation next year

Congress still has plenty on its “to do” list before the end of 2024, including funding the government, extending or passing a new farm bill and potentially moving some type of ad hoc disaster and economic assistance.

But as the year winds down, President-elect Donald Trump is moving quickly, along with his Republican majority leaders in both the House and Senate, to shape the 2025 legislative agenda. One of Trump’s top legislative priorities is extending and perhaps expanding the Tax Cuts and Jobs Act that he pushed Congress to pass in 2017. Most of those major tax reforms expire in 2025.

The expiring TCJA provisions include reduced personal income tax rates, a 20% deduction for small business income and a doubling of the estate tax exemption. A bonus depreciation provision widely used by farmers is set to phase out by 2027.

To act quickly, Republican leaders are widely expected to move forward with a special budget reconciliation process as rapidly as possible after the new Congress is seated Jan. 3.

Created as part of the Budget Act of 1974, budget reconciliation is intended to help lawmakers make the tax and mandatory spending changes necessary to meet the levels proposed in the Congressional budget resolution, according to the Committee for a Responsible Federal Budget.

In total, 23 bills have become law through reconciliation, including the 1990 Omnibus Budget Reconciliation Act; the Balanced Budget Act of 1997; the 2001, 2003 and 2017 tax cuts; portions of the Affordable Care Act of 2010; the American Rescue Plan; and the Inflation Reduction Act. The CRFB said some of these efforts, such as the 1990 and 1993 Omnibus Budget Reconciliation Acts, produced significant deficit reduction, while others, such as the 2001, 2003, and 2017 tax cuts, have increased deficits.

Reconciliation instructions set cost or savings targets for Congressional committees, with instructions covering mandatory spending, revenue or debt limit changes. Following these instructions, committees of jurisdiction identify specific policies to meet these goals in the form of a reconciliation bill, which can be enacted on a fast-track basis.

A reconciliation bill is privileged in several ways, including a 20-hour limit on debate in the Senate, a non-debatable motion to proceed to the bill and a test for which amendments are germane, the CRFB points out.

The budget reconciliation process could allow Republicans to pass tax and spending cuts without any Democratic votes. That’s crucial since just extending the expiring provisions of the 2017 Tax Cuts and Jobs Act is estimated to cost $5 trillion over 10 years, and Trump has proposed additional cuts, including exemptions on tips and Social Security income.

Reconciliation bills can pass the Senate on a simple majority vote, bypassing the 60-vote threshold for other legislation. Republicans will have two chances next year to move reconciliation bills, one for fiscal year 2025, which started last month, and the other for FY26, which begins next Oct. 1.

Some farm bill measures could go along as part of this rather complicated process, but not all.

Assuming Congress doesn’t pass a new farm bill before the end of the year, a Senate aide close to the farm bill strategy told Agri-Pulse that some provisions could be included in a reconciliation bill, including a cut to projected funding for the Supplemental Nutrition Assistance Program. Conservation funding provided by the Inflation Reduction Act in 2022 also could theoretically be clawed back. 

The reconciliation bill also could help enact across-the-board tariffs, another priority for the president-elect. Trump argued during the campaign that new tariffs could offset the revenue lost from new tax cuts and spending.

Budget reconciliation is not likely to be as easy as previous efforts, in part because of the relatively slim margins in the House. The size of the GOP conference is still unclear because, two weeks after the elections, some votes are still being counted. For now, Republicans lead Democrats by only 218 to 212. That means a handful of Republicans could slow down passage of a reconciliation bill if their demands aren’t met.

Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.com.