Understanding Budget Reconciliation and the Future of US Tax Reform

Understanding Budget Reconciliation

Budget reconciliation is a legislative strategy allowing tax, spending, and debt limit changes through a budget resolution. Bypassing a Senate filibuster, it requires only a majority vote, as seen with the 2017 Tax Cuts and Jobs Act (TCJA), 2021’s American Rescue Plan Act (ARPA), and 2022’s Inflation Reduction Act (IRA). However, reconciliation has constraints like the Byrd rule, which prohibits policy shifts not related to spending or revenue and prevents deficit increases beyond the budget window. Notably, reconciliation cannot alter Social Security.

Explaining the Tax Cuts and Jobs Act

The 2017 Tax Cuts and Jobs Act (TCJA), known as the Trump Tax Cuts, streamlined tax filing and reduced tax burdens, enhancing capital investment and refining the corporate tax framework. By late 2025, these individual tax benefits expire, posing potential tax hikes for 62% of filers if Congress doesn’t act. Extending these cuts could cost trillions, demanding strategic fiscal planning.

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Future of Tax Reform: Pro-Growth and Fiscal Responsibility

With the TCJA’s expiration looming, the Tax Foundation offers analysis on impactful policies. Their studies highlight the TCJA’s benefits and potential reforms for economic growth and tax system efficiency. Whether pursuing fundamental tax reform or extending the TCJA, policymakers face tough decisions. The Tax Foundation presents revenue-neutral strategies for a pro-growth tax framework, ensuring minimal deficit impact and equitable tax burden distribution.