The GOP readies for the impending struggle over the expenses of the $5 trillion tax reduction.

• In the upcoming year, addressing the tax package is a top priority for Republicans.
• The Congressional Budget Office estimates that extending the 2017 tax cuts would result in a $5 trillion increase to the deficit over a 10-year period.
• A small group of Republicans could impede the process in the House and Senate due to narrow margins.

On Capitol Hill, Republicans are preparing to extend the 2017 tax cuts, but disagreements are arising over how to cover the expense.

The Congressional Budget Office estimates that extending tax provisions will increase the deficit by $5 trillion, but many lawmakers dismiss or explain away the number, arguing that tax cuts will help the economy and increase government revenue.

As lawmakers consider extending and expanding the Tax Cuts and Jobs Act of 2017, one of the initial debates will center on costs. The act raised the standard deduction, lowered income tax rate brackets, and introduced a deduction for small business income. These provisions are set to expire at the end of 2025, while some other changes in the bill, such as the 21% corporate tax rate, will continue.

Steve Scalise, the House Majority Leader, criticized the CBO for not always employing dynamic scoring, which takes into account both the initial and secondary economic effects.

In a recent interview with CNBC in the Capitol, he stated that the tax credits, mandates, rules, and regulations that add significant costs to families in the economy will be reduced to revive the economy.

Some top tax leaders, including Sen. Mike Crapo, R-Idaho, the incoming chair of the Senate Finance Committee, have downplayed the $5 trillion estimate by assuming that the 2017 tax provisions have already expired.

Crapo stated that the tax measures are a continuation of current policy, and preventing taxes from increasing should not be considered as adding to the deficit, hence they do not need to be paid for.

He stated on Fox Business that if the current law is being extended, there will be no tax increase or decrease, which is unacceptable given the $4 trillion dollar deficit.

A group of deficit hawks are concerned about the growing deficit and believe that any tax package must be fully balanced.

Even with narrow margins in the House and Senate, a few lawmakers can effectively block the passage of the package if they feel it is too expensive.

If no Democrats support the GOP bill, Republicans can only lose four senators. The margins in the House are uncertain due to a few close races that have not yet been decided. The vote count in the House is complicated by President-elect Donald Trump's appointment of two House Republicans to his administration, Reps. Elise Stefanik of New York and Mike Waltz of Florida.

On November 13, former Rep. Matt Gaetz of Florida resigned from the House just hours after Trump announced he would nominate Gaetz as attorney general. However, opposition from the Senate caused Gaetz to withdraw from consideration for AG. As a result, his House seat will remain vacant until a special election fills it.

Rep. Chip Roy (R-Texas) emphasized the importance of addressing the deficit through the tax package, as another proponent of dynamic scoring.

"He emphasized the importance of not just making the budget deficit neutral, but actively reducing it, during a press conference on the House steps last week. He stated that he would advocate for this approach."

Rewritten: Congress needs to be "intellectually honest" about the impact of tax cuts on growth and the government's efforts to address the debt, as stated by other members, including Rep. Greg Murphy, R-N.C.

"He told CNBC in the Capitol that he wanted everything offset and that it was killing the nation. He referred to it as the greatest silent cancer and emphasized the need for honesty about the issue. He also stated that the government must take in revenues to pay for itself."

Whether Murphy would support legislation that increases the deficit remains uncertain.

The House Budget Committee, headed by Rep. Jodey Arrington, R-Texas, is discussing various opinions among Republicans on the most effective way to evaluate the tax bill's impact on the debt.

"He informed CNBC in the Capitol that there are numerous opinions on both sides, and he believed that people would focus more on their worries about the deficit. Some would argue that without growth, they would never escape the current predicament."

The tax bill's negotiations and discussions on revenue raisers are still in their initial stages.

Several Republicans are in favor of repealing tax incentives for electric vehicles under the Inflation Reduction Act, which was enacted by President Joe Biden in 2022.

The specific clean energy proposals that will be rolled back is uncertain. Republican-leaning congressional districts have benefited from the programs, and 18 lawmakers wrote to House Speaker Mike Johnson, R-La., in an August letter to preserve some tax credits in the IRA that have already helped their constituents. Johnson stated that he would need to use a "scalpel, not a sledgehammer," when deciding which parts of the package to keep and which to cut.

Republicans are exploring alternative pay-fors, such as tariffs, which Trump intends to use as revenue generators and geopolitical bargaining tools. However, assessing the impact of tariffs could be challenging because an increase in the cost of goods from specific industries or countries may result in unforeseeable ripple effects, such as altering consumer behavior or prompting retaliatory tariffs.

Some of Trump's campaign promises, such as eliminating taxes on tipped income, removing the cap on state and local tax deductions, and not taxing social security benefits, are being debated by lawmakers as part of the bill.

The cost of the legislation would increase if measures were added to decrease overall revenue for the government.