Legislative Lowdown
Senate Budget Committee Marks Up FY 2025 Budget Resolution: On Feb. 12, the Senate Budget Committee advanced a fiscal year (FY) 2025 budget resolution by a party-line vote of 11-10. The resolution includes the following spending instructions, mirrored for the corresponding House committees, that direct committees to report reconciliation legislation that would increase the federal deficit by up to the specified amount:
- Senate Judiciary Committee ($175 billion)
- Senate Homeland Security and Governmental Affairs Committee ($175 billion)
- Senate Armed Services Committee ($150 billion)
- Senate Commerce, Science and Transportation Committee ($20 billion)
- Senate Environment and Public Works Committee ($1 billion)\
It also directs each of the following committees to identify legislative changes that would reduce the deficit by at least $1 billion from FY25 through FY34:
- Senate Agriculture, Nutrition and Forestry Committee
- Senate Health, Education, Labor and Pensions Committee
- Senate Energy and Natural Resources Committee
- Senate Finance Committee
Under the resolution, committee leadership in the House and Senate would have until March 7 to submit their reconciliation legislation to their chamber’s Budget Committee.
Senate Republicans argued that the budget resolution would result in legislation cutting perceived “wasteful government spending” by the Biden administration, including the electric vehicle (EV) tax credits established under the Inflation Reduction Act (Pub. L. 117-169), and emphasized the importance of reducing the national debt. Senate Democrats argued that the budget resolution would lead to significant reductions in tax rates for wealthy taxpayers and hurt working-class families by removing health-insurance options.
House Budget Committee Marks Up FY 2025 Budget Resolution: On Feb. 13, the House Budget Committee advanced a fiscal year (FY) 2025 budget resolution by a party-line vote of 21-16. The resolution includes the following spending instructions that direct committees to report reconciliation legislation that would increase the federal deficit by up to the specified amount from FY 2025 through FY 2034:
- House Armed Services Committee ($100 billion)
- House Homeland Security Committee ($90 billion)
- House Judiciary Committee ($110 billion)
- House Ways and Means Committee ($4.5 trillion)
The resolution also directs committees to report reconciliation legislation that would decrease the federal deficit by not less than the specified amount from FY 2025 through FY 2034:
- House Agriculture Committee ($230 billion)
- House Education and the Workforce Committee ($330 billion)
- House Energy and Commerce Committee ($880 billion)
- House Oversight and Government Reform Committee ($50 billion)
- House Transportation and Infrastructure Committee ($10 billion)
The House Budget Committee resolution also includes a $4 trillion debt limit increase. Under the resolution, committee leadership in the House has until March 27 to submit their legislation to the House Budget Committee. The budget resolution also included a policy statement specifying that, if other committees do not reach or exceed $2 trillion in savings, the deficit would reduce the Ways and Means Committee’s spending instruction, potentially affecting the committee’s ability to pass bills extending provisions of the Tax Cuts and Jobs Act (Pub. L. 115-97). If the other committees exceed $2 trillion in savings, then the surplus would be added to Ways and Means’ spending instruction.
As in the Senate Budget Committee markup, House Republicans argued that spending cuts would be needed to fix and repeal harmful Biden administration policies, including the electric vehicle (EV) tax credits in the Inflation Reduction Act (IRA, Pub. L. 117-169). Republicans also defended their economic growth projections in the bill and rejected Democratic amendments to strike various committee reconciliation instructions. Democrats argued that the budget resolution would worsen economic inequality and harm working-class taxpayers. They also defended the IRA programs and tax credits, highlighting that the majority of spending and incentive value has centered in Republican districts.
Thune, Feenstra Introduce Bill to Permanently Repeal Estate Tax: On Feb. 13, Senate Majority Leader John Thune (R-SD) reintroduced the Death Tax Repeal Act (S.587), which would permanently repeal the estate tax, commonly referred to as the “death tax.” In his press release, Leader Thune noted that the estate tax can often disproportionately affect family-owned businesses and farms, creating an undue tax burden. The bill has 45 cosponsors of the Senate Republican Conference, including Senate Finance Committee Chairman Mike Crapo (R-ID). Companion legislation (H.R. 1301) was introduced in the House by Rep. Randy Feenstra (R-IA) and has 175 cosponsors, including Democratic Reps. Sanford Bishop (D-GA), Don Davis (D-NC) and Dan Goldman (D-NY).
Tax Worldview
Trump Issues Memorandum with Plans to Impose ‘Reciprocal Tariffs’: On Feb. 13, President Trump signed a memorandum directing the secretary of commerce and U.S. trade representative (USTR) to review all tariffs imposed on U.S. exports as well as other non-tariff trade barriers that undermine U.S. market access abroad. The designated officials are directed to recommend a reciprocal duty amount or other measure that should be applied to each country. The memorandum does not specify which tariff authorities could be used to impose reciprocal tariffs. Instead, it states that USTR and the Commerce Department “shall initiate, pursuant to their respective legal authorities, all necessary actions to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners.”
The new reciprocal-tariffs memorandum builds on the approach outlined in the America First Trade Policy Memorandum that President Trump issued on Jan. 20, which directed the same officials to identify any unfair trade practices by other countries and recommend appropriate actions. It also identified the International Emergency Economic Powers Act (IEEPA) as a potential tool through which to respond.
In comments from the Oval Office, President Trump explained that “reciprocal” tariffs would be applied to all nations with no exclusions. A White House Fact Sheet identified India, Brazil, the European Union (EU) and Canada as countries with affiliated groups that impose unfair trading practices on the United States. In his remarks, the president also stated that the United States will treat the EU’s Value Added Tax (VAT) “like a tariff,” despite comments from economists and tax scholars suggesting that VATs are trade-neutral with regard to treatment between domestic and imported gods, unlike tariffs. President Trump also criticized Canada’s and France’s digital sales taxes (DSTs) in the fact sheet, noting that the two countries “collect over $500 million per year from American companies” because of DSTs and that “only America should be allowed to tax American firms.”
1111 Constitution Avenue
DOGE Seeks to Access IRS and Sensitive Taxpayer Information as Lawmakers Respond: On Feb. 14, it was reported that Gavin Kliger, a special advisor to the director at the Office of Personnel Management and aide to Elon Musk at the Department of Government Efficiency (DOGE), visited the Internal Revenue Service (IRS) to meet with information technology and compliance staff, including Chief Taxpayer Compliance Officer Heather Maloy, Chief Information Officer Rajiv Uppal, Chief Technology Officer Kaschit Pandya and Chief Taxpayer Services Officer Kenneth Corbin. DOGE had also requested to review the system the IRS uses for internal accounting operations, which is in a database supposedly separate from taxpayer data. This follows comments from Treasury Secretary Scott Bessent stating that DOGE has only been granted read-only access to federal payment data, which was refuted as a taxpayer data privacy concern by Democrats and agency watchdogs.
Following the visit, on Feb. 16, it was reported that the IRS was considering a memorandum of understanding, under pressure from the White House, that would allow Kliger to work at the IRS for 120 days (which can be renewed by the IRS and White House) and to access the agency’s Integrated Data Retrieval System (IDRS), a system that allows the IRS to access individual taxpayer accounts with sensitive information including personal identification numbers and bank account information. The memorandum reportedly requires that Kliger maintain confidentiality of tax return information, but watchdogs have remained skeptical because political appointees such as Kliger are rarely granted access to the IDRS.
Both Republican and Democratic lawmakers have responded to these developments, with Republicans generally optimistic about DOGE’s ability to detect waste, fraud and abuse at agencies including the IRS, and Democrats expressing alarm over providing access to taxpayer information. On Feb. 13, House Ways and Means Committee Chairman Jason Smith (R-MO) wrote a letter to IRS Acting Commissioner Douglas O’Donnell expressing concern for certain agency actions under the Biden administration and urging the agency to comply “with all laws, Executive Orders, direction from the Secretary of the Treasury, and requests from the House Committee on Ways and Means and the Senate Committee on Finance.”
Meanwhile, Democrats on the committees have taken action in an attempt to provide more transparency on DOGE’s access to taxpayer data. In the House Ways and Means Committee, Rep. Lloyd Doggett (D-TX) led a Resolution of Inquiry on Feb. 12 signed by all committee Democrats requiring the president and the treasury secretary to provide all documentation to the House of Representatives concerning all instances of access to Treasury Department payment systems and confidential information accessed by Elon Musk or DOGE. In the Senate Finance Committee, Ranking Member Ron Wyden (D-OR) and Sen. Elizabeth Warren (D-MA) wrote a letter to Acting Commissioner O’Donnell on Feb. 17 asking the agency to “immediately clarify the extent to which DOGE team members may have inspected or be seeking to inspect the private tax return information of millions of Americans and whether taxpayer privacy laws are being enforced to prevent unauthorized disclosure and intrusions.”
Probationary Employee Firing to Include IRS Employees: As part of the Trump administration’s efforts to downsize the federal workforce by firing probationary employees (mostly consisting of employees that were hired by the federal government in the last one to two years), early reports indicate that between 10,000 and 15,000 Internal Revenue Service (IRS) employees could face termination. It remains unclear how many IRS employees will be affected, though Treasury Secretary Scott Bessent noted that the order would have a limited effect on IRS employees deemed crucial to the ongoing tax-filing season. However, several IRS employees may have been hired recently by the Biden administration in taxpayer services, enforcement and modernization roles, as part of Inflation Reduction Act (Pub. L. 117-169) funding to revitalize agency operations.
Ways and Means Committee Advances Tax Administration, Pandemic Unemployment Fraud Bills: On Feb. 12, the House Ways and Means Committee completed a markup of the Recovery of Stolen Checks Act (H.R. 1155), the National Taxpayer Advocate Enhancement Act of 2025 (H.R. 997), the Internal Revenue Service Math and Taxpayer Help Act (H.R. 998), the Electronic Filing and Payment Fairness Act (H.R. 1152) and the Pandemic Unemployment Fraud Enforcement Act (H.R. 1156). All five bills were reported to the full House for consideration, with the first four bills advancing unanimously and the last bill passing on a party-line 24-18 vote. Republicans on the committee, including Chairman Jason Smith (R-MO), emphasized the importance for the IRS to find ways to improve tax administration while mitigating waste, fraud and abuse. Democrats on the committee, including Ranking Member Richard Neal (D-MA), scrutinized the attempted access to Treasury Department payment systems by Department of Government Efficiency (DOGE) officials without oversight from Congress.
At a Glance
ITEP Finds Revenue Loss from Involving IRS in Deportation Efforts: On Feb. 11, the Institute on Taxation and Economic Policy (ITEP), a left-leaning think tank, wrote a report titled “Turning IRS Agents to Deportation Will Reduce Public Revenues.” The report makes a correlation between “weaponizing IRS agents to become involved in deportation” and decreased tax compliance among undocumented immigrants, many of whom pay federal and state taxes despite not having a valid Social Security number. The analysis finds that, for every 10-percentage-point decline in tax compliance among undocumented immigrants, federal tax revenue would be reduced by about $8.6 billion annually and state and local tax revenue would be reduced by about $900 million annually.
Hearings and Events
House Ways and Means Committee
The House Ways and Means Committee has no tax hearings scheduled for this week.
Senate Finance Committee
The Senate Finance Committee has no tax hearings scheduled for this week.