President Trump used his 4 March 2025 address to the joint session of Congress to remind the American public and Congressional leaders that he is serious about adding his imprimatur to the tax code—and in the process adding to the pressure that Republican leadership and tax committee chairs already face as they attempt to extend the 2017 tax cuts using budget reconciliation. 

The President highlighted several tax policies he has championed during his campaign and in the weeks following his inauguration. On the business side, he touted a reduced tax rate on US manufacturers and 100% full expensing retroactive to 20 January 2025, (Inauguration Day). In addition to making the 2017 Tax Cuts and Jobs Act tax cuts permanent, he listed no taxes on tips, overtime, social security, and deductibility of car loan interest if the vehicle is produced in the United States, for individuals. Notably, he did not mention his proposal to lift the cap on state and local taxes (SALT), an issue that continues to divide the Republican caucus. 

Each of these proposals has a cost, increasing the amount of revenue offsets that the tax writers must find to pay for them, or increasing the deficit if they do not, assuming a current law baseline. Indeed, some of the President’s other proposals would be offsets, which he also did not mention during his remarks. These include scaling back on the ability of sports team owners to amortize the cost of player contracts and taxing carried interest as ordinary income.

Congressional Republicans are in the midst of the arcane budgetary practice called budget reconciliation to enact tax reform without having to negotiate with or rely on Democrats. Because it is, in fact, a budgetary maneuver, the cost of tax reforms will be restricted by budget reconciliation instructions included in a budget resolution. The House resolution limits a decrease in revenue to US$4.5 trillion—barely enough to extend the 2017 tax cuts let alone accommodate the President’s own priorities, which House members view as something that they must address, especially after the President highlighted them in his joint session remarks. They do have some flexibility since Mr. Trump has not been particularly specific about most details, but when they have no room to spare to begin with that may be a distinction without a difference. These challenges are exacerbated by extremely tight margins in the House, intraparty tensions about cuts in benefits, adding to the deficit, and other assumptions that are part of the budget reconciliation process.

Although he did not specifically mention taxes of foreign jurisdictions during his remarks about imposing reciprocal tariffs—as some of his executive orders do—the President may have indirectly implicated certain foreign taxes and information-reporting regimes when he referred to “non-monetary” tariffs. He gave Speaker Johnson permission to use tariff revenues to reduce the deficit or for “anything you want to;” perhaps to help pay for tax cuts in budget reconciliation.

The President’s remarks reinforced his commitment to his campaign and post-inaugural tax proposals. It will be up to his House and Senate counterparts to sharpen their pencils and their elbows to successfully figure out how to accommodate President Trump’s priorities as part of the budget reconciliation process.