(Yahoo! Finance) - Republicans are beginning to map out the early stages of Trump 2.0, and a debate is emerging about whether to go ahead with plans to cut a tax deal quickly or wait until later in 2025.
On Tuesday, Senator John Thune indicated he is leaning toward the going slower camp on taxes at least.
The soon-to-be Senate majority leader told his colleagues in a closed-door meeting, according to multiple reports, that he wanted to use the Senate's reconciliation process to first pass a package focused on the border, energy, and national defense, perhaps within Trump's first 30 days in office.
He would then hold a tax bill until later in 2025.
The move to hold it, which received some immediate pushback, was partly about logistics but also indicative of the political reality that Republicans still have a lot of work to do on taxes.
"Investors will probably need to wait until Q4 for clarity about taxes," Tobin Marcus, the head of US policy and politics at Wolfe Research, told Yahoo Finance via email Wednesday. "But that was always the likeliest outcome."
Despite some initial talk about getting a tax deal inked in Trump's first 100 days, Marcus added, "realistically we've always expected that next year's tax package would get done late in the year, because it'll be a complex debate among Congressional Republicans and the only deadline is in December."
In any case, some sort of 2025 tax deal is almost surely in the offing with that deadline of Dec. 31, 2025, looming when an array of 2017 tax cuts for individuals — signed into law during Trump 1.0 — are set to expire.
Republicans will need to iron out many issues before then, from paying for the new cuts to what to do about the state and local tax (SALT) deduction.
Others are in the go-fast camp
To be sure, plenty are still pushing for taxes to go first.
House Ways and Means Chair Jason Smith immediately slammed Thune's idea, calling it "reckless" to Punchbowl News and saying that pushing up against the December deadline would be "creating an opportunity to increase taxes for all Americans."
House Speaker Mike Johnson hasn't weighed in on the back and forth. He previously signaled a desire to get taxes done in Trump's first 100 days but will be dealing with a razor-thin majority in 2025 that will limit his ability to act quickly.
Republicans are only likely to control the House by a margin of 217-215 for the first few months of 2025, and Johnson will be tasked with crafting a complex deal amenable to a GOP caucus that spans from moderate New Yorkers to arch conservatives. All the factions are eager to shape a deal to their liking and will hold significant leverage as only a few Republican no votes would likely kill a deal.
President-elect Donald Trump hasn't weighed in, either, but he talked about immigration nonstop throughout 2024 and often promised fast action. As such, he is seen as likely to be amenable to holding taxes a bit in favor of addressing a central campaign issue quickly.
"We're still having a lot of conversations about the structure," Steve Scalise, the House majority leader and Johnson's top deputy, told reporters.
Part of the reason that policymakers are being forced to choose the order is the reconciliation process that will allow the Senate to pass a deal without Democratic votes. But that is an arduous process with timing restrictions that would likely push a second (tax-focused) round of reconciliation into later 2025.
The debate to come centers on extending an array of individual tax cuts that were signed into law by Trump himself in 2017 and expire at the end of 2025.
What policymakers have to figure out is how they will cover the $4 trillion-plus tab for simply extending those cuts as well as an array of additional priorities that Trump outlined on the campaign trail and other ideas that individual lawmakers are set to bring to the table.
A key question for an overall deal, Tax Foundation senior policy analyst and modeling manager Garrett Watson said in a recent appearance on the Capitol Gains podcast, is "trying to make the numbers work."
"Can they get a top-line deficit number that they can live with in both chambers?"
By Ben Werschkul - Washington Correspondent
