THE MATH PROBLEM: It hasn’t even been four weeks since Election Day, so it probably should be no surprise that Republicans remain in a honeymoon period — talking up their hopes and plans to cut taxes as much as they can in 2025, and for the most years possible. But it’s also abundantly clear that the GOP will have to work through some math issues when crafting a tax bill next year. Republicans intend at least to pass a large fiscal package quite quickly next year, one that would combine tax cuts with a variety of other policy priorities. GOP leaders are planning to use a mechanism, budget reconciliation, that will allow them to pass something without Democratic votes. They’ve also shown no signs that their narrow congressional majorities, particularly in the House early next year, will limit their ambitions. Still, Republicans will have to decide internally on how much a budget reconciliation measure can add to deficits, at a time when at least some in the House believe the answer should be zero. A deficit-neutral bill could be challenging to pull off while also extending the expiring parts of the Tax Cuts and Jobs Act, which CBO estimates would cost around $4 trillion over a decade. Republicans could look to other areas to help defray the cost of a tax bill, like Medicaid, food stamps and clean energy incentives from the Democrats’ 2022 tax-and-climate law. They might also examine alternative scoring methods that would find that it costs nothing to extend tax cuts already on the books. All of which is a long way to say: Republicans’ best-laid plans might not work out on cutting taxes next year. And that could lead them to consider a shorter-term extension of the temporary parts of the Trump tax cuts, even if it’s totally natural for the scope and design of a 2025 tax bill to still be early in the discussion phase. Besides offsets and a shorter bill, the GOP could look at other ways to reduce the size of a budget reconciliation bill, including offering less tax relief or not doing a full extension of TCJA. Something else to consider: Republicans certainly have good reasons to try and avoid something like a four-year tax bill. Politically, for instance, a shorter-term bill risks giving Democrats more of a say over the future of the tax system, and pretty quickly. But it’s worth noting: Republicans believed these expiring parts of the Trump tax cuts were more politically palatable than the law’s corporate tax cuts. That’s one of the reasons that Republicans made the corporate provisions permanent in TCJA, along with believing that would do more for long-term growth and investment. Meanwhile, allowing the 2017 law’s individual provisions — like lower rates, a larger standard deduction and a bigger Child Tax Credit — to expire after eight years was a bet that Democrats would never allow that tax relief to expire for people up to the upper middle class. MORE ON POTENTIAL COMPLICATIONS: It’s not just the expiring Trump tax cuts that Republicans will have to deal with next year. It’s also the newly promised Trump tax cuts. Among those: Lifting the TCJA’s $10,000 cap on state and local deductions, something Trump vowed to do during the campaign — and also a step that would unwind the only major revenue-raiser set to expire at the end of next year. Blue-state Republicans in the House have also been clear that they’ll use whatever leverage they can to facilitate SALT relief next year. “I have been very clear I will not support a tax bill that does not lift the cap on SALT,” Rep. Mike Lawler (R-N.Y.) said over the weekend on CNN’s “State of the Union,” though he did ease that hard line a bit moments later. “We all got elected, individually, yes, but we got elected to serve as a Republican majority and work to get things done on behalf of the American people,” Lawler added. BREAKING: President Joe Biden pardoned his son Hunter on Sunday, following the younger Biden’s conviction on tax and gun charges. Hunter Biden was set to be sentenced later this month on tax charges, after pleading guilty around three months ago. In that case, Hunter Biden acknowledged not paying more than $1 million in owed taxes for the years between 2016 and 2019. But Joe Biden said that defendants that pay back taxes and penalties, like Hunter, are rarely prosecuted. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories.
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