WE’RE WORKING ON IT: Here’s the second problem for Republicans. Leading GOP lawmakers say they’re looking at a lot of additional tax ideas that would give a boost to the economy. But a lot of the extra floated tax cuts that already are front-and-center in this year’s debate wouldn’t actually do that. Republicans will almost certainly have to include some kind of relief from the $10,000 cap on state and local deductions to win the support of more than a dozen GOP lawmakers from states like California, New Jersey and New York. Not much growth would come from that, nor would it come from some of the proposals to greatly expand the Child Tax Credit, which currently maxes out at $2,000-per child and would drop to $1,000 if no tax deal arises this year. Another idea to keep in mind: President Donald Trump went to Las Vegas on Saturday for his first rally after starting his second term. That location was no accident, either, as the event was billed as a chance for Trump to further pitch his idea to eliminate taxes on tips. Now, the president didn’t really use that opportunity to pound an “economic-focused message,” as his aides put it, even with “no tax on tips” emblazoned behind him. But those closely watching this year’s tax debate believe it’s quite likely that some kind of tax exemption for tips appears in a final deal, and congressional staffers have already been working through the various permutations of that idea — like whether to include payroll taxes, and how to install limits to prevent salaried workers from repurposing their income. This probably should be no surprise — “no tax on tips” was the first of Trump’s various targeted tax cut ideas from the campaign, the one that got the most attention and also happens to poll pretty well. Rohit Kumar of PwC also noted on Friday that excusing taxes on tips also wouldn’t be as expensive as some of Trump’s other tax cut proposals. “It has the virtue of being very popular and not terribly expensive, and you can see why it moves to the front of the line,” Kumar said at a media breakfast hosted by the company. It’s also not an idea that Republicans can necessarily count on for lots of growth, even as they also grapple with big-picture questions like the trade-off between how progressive a cut “no tax on tips” should be and how much it should cost. In fact, lots of economists believe eliminating taxes on tips is a bad idea — and there appears to be some uncertainty about how it might affect the economy, in no small part because it’s such an untested idea. THE TIME IS NOW: These and many other questions are hanging over House Republicans as they head to a Trump property in Florida for a retreat. Those kinds of details — that is, the contours and costs of individual tax proposals — might not need answers yet. But GOP lawmakers still have a lot to decide while they’re down there, particularly if they want to meet their goal of considering a fiscal framework in the Budget Committee as soon as next week, as our Meredith Lee Hill noted over the weekend. That includes specific instructions for how much taxes can be cut in a reconciliation bill, and the scale of cost savings required of a variety of committees. Republicans already have floated a variety of potential spending cuts, including a good number aimed at safety net programs, and some potential revenue-raisers as well. GETTING CLOSE TO A SWEARING-IN: Scott Bessent, Trump’s pick for Treasury secretary, got a bit of a rough reception from Democrats on the Senate Finance Committee during his confirmation hearing. But the Senate floor consideration of his nomination has been rather low-drama, particularly compared with some of the president’s other picks. Fifteen Democrats in all supported Bessent in a procedural vote on Saturday, setting him up for what looks to be an easy final vote as soon as today, as our Michael Stratford noted. GOOD TIMING: Today also happens to be the opening day of the tax filing season, which is coming at a particularly stressful time for the IRS. Trump put extra restrictions on the IRS in his executive order for a federal hiring freeze last week, giving a soon-to-be Secretary Bessent a say in when the agency could start bringing on staffers again. He then underscored why the agency currently is in a particularly vulnerable position at that Las Vegas rally on Saturday. The president repeated the at best misleading claim that the IRS was hiring 87,000 new agents with the extra funding granted by Democrats during the Biden administration. In fact, Trump bumped that up to 88,000 and cracked that he would seek to fire them all — or force them to transfer to border control. All this attention is likely to put even more of a microscope on the IRS and its handling of the filing season, after the agency has dealt with a variety of challenges in recent years, like a pandemic-induced backlog of unprocessed tax returns. Generally speaking, close observers of the IRS have said they don’t think the hiring freeze will have too much direct effect on the filing season, because most of the temporary workers that the agency hires for this part of the year should already be on board. But that’s not a unanimous view. “Freezing hiring at the IRS will severely impact the level of service provided to American taxpayers when they need it most,” Doreen Greenwald, the national president of the National Treasury Employees Union, said last week. And even those who believe the freeze won’t have much impact on filing season, like the American Institute of CPAs, say they’ll be watching the situation closely. “We are greatly sensitive to the filing season service challenges for members and taxpayers,” Melanie Lauridsen of AICPA wrote in a LinkedIn post on Friday.
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