House Republicans are at odds with Senate GOP negotiators over how long to extend President-elect Trump’s tax cuts, which are set to expire at the end of 2025.
Sources close to the discussions between House and Senate Republicans reveal that the House GOP is proposing a four-year extension of the tax cuts. This shorter timeline is intended to mitigate the projected impact on the federal deficit, as calculated by the Joint Committee on Taxation, and avoid backlash from fiscal conservatives.
“These discussions are ongoing and fluid,” incoming Senate Majority Leader John Thune (R-S.D.) said, emphasizing that no final decision has been made.
House Speaker Mike Johnson (R-La.) and House Ways and Means Committee Chair Jason Smith (R-Mo.) are acutely aware of the slim majority they will operate with next year and the limited leeway they’ll have to accommodate conservative opposition.
A 10-year extension of the Trump-era tax cuts is estimated to add more than $4 trillion to the national deficit, which could be a hard sell to fiscal hawks alarmed by the country’s $36 trillion debt. A shorter extension, such as the four years proposed by House Republicans, would come with a smaller price tag and likely face less resistance.
Senate GOP Pushes for Long-Term Extension
Senate Republicans, set to govern with a more comfortable 53-seat majority, favor a 10-year extension to provide businesses and families with greater certainty.
Thune, a key architect of the 2017 tax law, acknowledged his preference for a decade-long extension but stressed the need for a package that could secure enough votes in both chambers.
“One has to balance aspirations with what’s achievable,” Thune said, adding, “We need to figure out what both the House and Senate can pass.”
However, some Senate Republicans have expressed frustration with the House GOP’s caution. A Senate Republican source called the House’s focus on limiting the duration of the tax cuts “unreasonable,” arguing that a 10-year extension should be the starting point of any negotiations.
Sen. Mike Crapo (R-Idaho), who is set to chair the Senate Finance Committee, has floated a novel approach to mitigate concerns about the cost. Crapo advocates scoring the tax package as a continuation of existing policy, rather than as a new expense, which would significantly reduce its budgetary impact on paper.
Differing Perspectives on Budget Scoring
Under current scoring rules, extending the Trump tax cuts is calculated as a new expense since they are scheduled to expire. Crapo argues that this approach inflates the projected cost, equating the extension of existing policy with new spending.
“If we don’t extend these tax cuts, it’s effectively a $4 trillion tax hike on Americans,” Crapo said in an interview, emphasizing the burden on middle-income families.
He added that he has discussed the issue with Trump, who supports his strategy. “President-elect Trump agrees that we need to think big and explain this to the American people,” Crapo said.
However, some conservatives have dismissed Crapo’s approach as a “budget gimmick,” emphasizing the need for offsets such as government downsizing to balance the costs.
“There’s no question we need to offset the deficit impact,” a conservative House aide said, adding that a significant portion of the package “should be paid for by fulfilling Trump’s promise to streamline government.”
Challenges Ahead
The disagreement over the length of the tax cuts reflects broader divisions within the GOP on fiscal strategy. House Republicans, operating with a narrow majority, face a delicate balancing act as they try to satisfy both moderates and fiscal conservatives.
Senate Republicans, meanwhile, are preparing for potential challenges in reconciling their preference for a long-term extension with the House’s more cautious approach.
Rohit Kumar, co-leader of PwC’s national tax office, pointed out that the GOP will need to make tough decisions regardless of the scoring method.
“Either you make one difficult decision upfront, or you’re faced with a series of smaller, equally hard choices,” Kumar said, referencing the need to balance priorities and offset costs.
With Republicans expected to hold a slim House majority, even a small number of defections could derail the tax package if Democrats remain unified in opposition. The departure of GOP lawmakers joining the Trump administration, such as Rep. Mike Waltz (Fla.), adds further complications.
As negotiations continue, the GOP faces a critical challenge in aligning its priorities and delivering a tax package that can pass both chambers while addressing growing concerns about fiscal responsibility.