Policy Backgrounders

Next Steps in Reconciliation: House Committee Markups

May 16, 2025

This week, three key House Committees held markups on their portions of the reconciliation bill Republicans are using to advance the President’s legislative agenda. These markups are an important step towards finalizing the details on tax cuts and reductions in spending that will be included in the comprehensive bill scheduled to head to the House floor before Memorial Day weekend.

• The House Committee on Ways and Means passed its portion of the reconciliation bill focused on tax policy. The bill permanently extends the expiring provisions of the Tax Cuts and Jobs Act (TCJA) and implements additional tax breaks while phasing out clean energy tax credits from the Inflation Reduction Act (IRA).
• The House Energy and Commerce Committee also passed its part of the reconciliation bill, which includes significant cuts to Medicaid spending, the repeal and rescission of many environmental and energy laws from the IRA, and the auction of communications spectrum.
• The House Agriculture Committee held its markup hearing as well, making policy changes to the Supplemental Nutrition Assistance Program (SNAP) that restrict growth in benefits, impose more stringent work requirements, and increase cost-sharing for states.
• House Republicans must still negotiate compromises regarding the state and local tax (SALT) deduction and the level of spending cuts in the bill to satisfy both moderates concerned about cuts to the social safety net and hardline conservatives seeking higher spending reductions before the bill can pass out of the House.

House Committees Advance Key Portions of Reconciliation Bill

In mid-April, the House and Senate agreed to a concurrent budget resolution with instructions for House and Senate Committees to proceed with the reconciliation process. Republicans in Congress plan to use reconciliation to advance the President’s legislative agenda of extending the expiring provisions of the TCJA and increasing border security and defense spending. Since the passage of the budget resolution, Republicans in the House have worked to align the various faction within the GOP to arrive at a single bill that could pass the House floor. As part of that process, three key House Committees responsible for the tax portion of the reconciliation bill and spending offsets held hearings this week to mark up their portions of the bill.

House Committee on Ways and Means Markup

The House Committee on Ways and Means is charged with drafting the tax policy components of the reconciliation bill. After a marathon hearing on Tuesday extending into Wednesday, Republicans on the Committee advanced their markup of the bill by a party line vote of 26 to 19. The Joint Committee on Taxation (JCT) has estimated that the provisions in the bill will increase the deficit by more than $3.8 trillion between 2025 and 2034. The bill also increases the statutory debt limit by $4 trillion over the 10-year budget window.

The bill permanently extends the lower income tax rates from the TCJA that are scheduled to expire at the end of the calendar year and makes permanent the higher standard deduction under the TCJA. Additionally, the bill increases the standard deduction by including an extra year of inflation adjustment and temporary increases in the standard deduction of $1,000 for a single filer, $1,500 for head of household, and $2,000 for married filing jointly for tax years 2025 to 2028. JCT estimates these provisions increase the deficit by nearly $3.5 trillion over ten years, though this is offset by almost $1.9 trillion in savings by terminating the deduction for personal exemptions.

The bill permanently increases the unified estate and gift tax exemption to an inflation-indexed $15 million for single filers ($30 million for joint filers) starting in 2026 as well, which JCT projects will contribute more than $200 billion to the deficit over the next 10 years. Another important provision in the bill permanently extends the TJCA’s increased individual alternative minimum tax exemption amounts and exemption phase-out thresholds, a provision JCT estimates will add more than $1.4 trillion to the deficit between 2025 and 2034.

On the business side, the bill makes permanent the deduction for qualified business income included in the TCJA and increases the percentages used to calculate this deduction from 20 percent to 23 percent. JCT projects that these and other modifications to the deduction for qualified business income will increase the deficit by more than $800 billion over the next decade. Between tax years 2025 and 2029, the bill also allows businesses to immediately expense 100 percent of the cost of qualified property, reinstates the immediate deduction for domestic research and experimental expenditures, and increases the cap on deductibility of business interest expense, along with permanent modifications to the calculation of adjusted taxable income for purposes of business interest deduction. JCT estimates these three provisions will raise the deficit by nearly $100 billion over 10 years.

Additionally, the bill permanently increases the deduction amount for foreign-derived intangible income from 21.875 percent to 37.5 percent and increases the deduction for global intangible low-taxed income from 37.5 percent to 50 percent, which JCT estimates increase the deficit by over $140 billion between 2025 and 2034. The bill permanently reduces the base erosion minimum tax rate on corporations from 12.5 percent to 10 percent and permanently retains the current treatment of tax credits, contributing more than $30 billion to the deficit over 10 years. The bill contains new tax breaks for businesses as well, including provisions allowing businesses to immediately deduct 100 percent of the cost of certain new factories, certain improvements to existing factories, and certain structures (adding $150 billion to the deficit over 10 years) and provisions that extend and modify the clean fuel production credit (increasing the deficit by $45 billion over the next decade).

The bill also includes the enhanced child tax credit from the TCJA of a maximum of $2,000 per child, a temporary increase to $2,500 for tax years 2025 to 2028, and the increased TJCA income phase-out thresholds. Notably, filers will be required to provide the taxpayer’s Social Security Number (SSN) (and the spouse’s for joint filers) in addition to the child’s SSN when claiming the child tax credit. The child tax credit has been a priority for Committee on Ways and Means Chairman Jason Smith (R-MO). JCT estimates this provision will increase the deficit by almost $800 billion over 10 years.

Responding to the President’s call for additional tax breaks, the bill includes several tax cuts the President promoted on the campaign trail, including above-the-line deductions for qualified tips, overtime premium pay, and qualified passenger vehicle loan interest. The bill also contains an enhanced deduction for seniors age 65 or older of $4,000 per eligible filer with a modified adjusted gross income that does not exceed $75,000 for single filers ($150,000 for married filing jointly), with the goal of offsetting income taxes on a portion of their Social Security benefits. These additional tax cuts sunset at the end of tax year 2028 and JCT estimates these proposals will increase the deficit by more than $290 billion over the next decade.

To offset a portion of the deficit impact of the tax cuts above, the bill eliminates and phases out a slew of clean energy tax credits from the IRA, President Biden’s signature climate change law from 2022, producing hundreds of billions of dollars in savings over the next decade. Several dozen House Republicans have previously written to Chairman Smith in support of the current energy tax credits and four Republican Senators urged party leadership to preserve these credits, leading some Senate Republicans to warn that the repeals of the clean energy tax credits included in the House markup will likely change in the Senate.

Another thorny issue that produces cost savings in the markup is the cap on the itemized deduction for SALT. The SALT cap in the TCJA was set at $10,000 to offset the deficit impact of the 2017 law, and the cap is currently set to expire absent legislative action. The House markup permanently increases the SALT cap to $30,000 and phases the cap down for taxpayers with modified adjusted gross income over $400,000 until the cap reaches $10,000. The same caps apply to both single filers and married taxpayers filing jointly. While JCT estimates the revised SALT cap will reduce the deficit impact of the bill by more than $900 billion over 10 years, several Republicans from high tax states like California, New York, and New Jersey who view a higher SALT cap as a red line for their vote have reacted poorly to the proposal. House Speaker Mike Johnson (R-LA) plans to meet with these Republicans this week to hash out a compromise that also balances the concerns of hardline conservatives from the House Freedom Caucus who are seeking even more reductions in the deficit through reconciliation. 

House Energy and Commerce Committee Markup

The House Energy and Commerce Committee has a wide jurisdiction that encompasses Federal energy, environmental, communications, and health programs. The instructions in the budget resolution direct the Committee to deliver at least $880 billion in spending reductions over the 10-year budget window. In a hearing that lasted more than 24 hours, House Republicans passed their markup of the bill on Wednesday along party lines by a vote of 30 to 24. The Congressional Budget Office (CBO) analyzed the bill and determined that it delivers deficit reductions of more than $880 billion between 2025 and 2034.

The biggest policy issue from the hearing is cuts to Medicaid spending. Before the markup, CBO released a preliminary estimate of many of the Medicaid policy changes in the bill, projecting that they would decrease the deficit by $625 billion over the next 10 years. However, these deficit reductions would be accompanied by 10.3 million people losing Medicaid coverage and 7.6 million people becoming uninsured by 2034. The three policies that deliver the biggest spending reductions are: requiring states to establish Medicaid community engagement requirements (i.e., 80 hours of work, community service, work program, and/or educational program participation per month) for able-bodied adults without dependents ($300 billion in savings over 10 years); delaying implementation until 2035 of the Eligibility and Enrollment final rule that streamlined application and enrollment processes for Medicare Savings Programs and Medicaid (more than $160 billion in savings over 10 years); and instituting a moratorium on new or increased Medicaid provider taxes (nearly $90 billion in savings over 10 years). 

Other Medicaid policies that produce significant deficit reductions include: additional address verification and SSN checks to prevent individuals from being enrolled in multiple state Medicaid programs ($17 billion in savings over 10 years), increasing the frequency of eligibility redeterminations for the Affordable Care Act (ACA) optional expansion population from annually to every six months ($49 billion in savings over 10 years), and implementing a moratorium until 2035 on the long-term care facility minimum staffing standards rule for Medicare and Medicaid ($23 billion in savings over 10 years). The bill also institutes eligibility and income verification processes for individuals who purchase health insurance on ACA exchanges and eliminates income-based special enrollment periods for ACA exchanges.  

On energy and environmental policy, the bill rescinds many IRA programs and grants designed to promote clean energy and energy grid investments and repeals IRA policies intended to reduce pollution and greenhouse gas emissions. The bill also expedites the permitting process for natural gas and oil projects. On communications, the bill requires the National Telecommunications and Information Administration and the Federal Communications Commission to auction at least 600 megahertz of commercial or Federal spectrum by 2034. Additionally, the bill prohibits states from enforcing any law or regulation related to artificial intelligence models and systems during the 10-year budget window.

House Agriculture Committee Markup

The third important hearing that occurred this week was in the House Agriculture Committee, which has jurisdiction over SNAP. On Wednesday, House Republicans advanced their bill making significant changes to the program. CBO confirmed that the policy changes in the bill reached the Committee’s goal in the budget resolution of reducing deficits by at least $230 billion over the 10-year budget window.

The bill contains a cost neutrality provision that prevents updates to the Thrifty Food Plan based on a reevaluation of prices of market baskets and prohibits the reevaluation of the Thrifty Food Plan no more frequently than every 5 years, effectively constraining SNAP benefit increases. The bill also imposes more stringer work requirements for able-bodied adults without dependents. Finally, the bill increases SNAP cost-sharing for states. States would have to contribute 5 percent of the cost of SNAP allotments beginning in 2028, while states with higher SNAP error rates would have to contribute even more, with states with error rates of 10 or more percent being required to contribute 25 percent of the cost of SNAP allotments. The bill also increases the state share of SNAP administrative costs from 50 percent to 75 percent.

Conclusion

Now that these and other House Committees have completed their reconciliation markups, the House Budget Committee will package the individual bills into a comprehensive bill that will proceed to the House Rules Committee early next week and then to the House floor for a full vote. Speaker Johnson has set his conference a deadline of Memorial Day weekend to pass the reconciliation package out of the House. Assuming House GOP leadership can reach a compromise between the competing factions of SALT-focused Republicans, moderates concerned about cuts to the social safety net, and hardline conservatives seeking greater spending reductions, the bill will head to the Senate, where it will likely change. Looming over the entire budget reconciliation process is the need to raise the statutory debt limit before the US defaults on its national debt. Treasury Secretary Scott Bessent has urged Congress to increase or suspend the debt ceiling by mid-July given the Treasury Department’s projection that its extraordinary measures to avoid default will be exhausted sometime in August. All these factors and increasing stakes portend a critical next couple of months for Republicans in Congress.