What is Budget Reconciliation?
In 2017, Republicans used a procedure called budget reconciliation to pass the TCJA. Democrats used it for the American Rescue Plan Act (ARPA) in 2021, and the Inflation Reduction Act (IRA) in 2022. Reconciliation is a fast-track option to enact tax, spending, and debt limit changes outlined in a budget resolution, notably bypassing a filibuster in the Senate that would otherwise require 60 votes to avoid. Budget reconciliation allows Republicans to rely on a party-line vote for legislation, but they still face slim majorities in both chambers.
Lawmakers can specify targets or limits on reductions or increases in the deficit within the budget window. The “Byrd rule” limits what can be included in a reconciliation bill, disallowing policy changes that don’t affect spending or revenue, and disallowing changes that increase the deficit outside of the budget window. Reconciliation also specifically prohibits changes to Social Security.
What is the Tax Cuts and Jobs Act?
The 2017 Trump Tax Cuts, known as the Tax Cuts and Jobs Act (TCJA), reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system.
At the end of 2025, the individual portions of the Tax Cuts and Jobs Act expire all at once. Without congressional action, 62 percent of filers could soon face a tax increase relative to current policy in 2026. At the same time, the price tag for extending the 2017 Trump tax cuts is in the trillions.
tax Calculator Interactive map TCJA Archives
The Path Forward: Principled, Pro-Growth, Fiscally Responsible Tax Reform
Congress is staring down the expiration of the TCJA, and the Tax Foundation is prepared to provide insight and analysis on the policies at stake. Since its enactment in 2017, the Tax Foundation team has studied the TCJA’s underlying construction and resulting strengths and weaknesses. We have also analyzed fundamental reforms that would dramatically improve the US tax system to support economic growth as well as greater efficiency and simplicity.
Whether lawmakers target fundamental tax reform or follow the outline of the TCJA, they will confront decisions on what to prioritize in this forthcoming round of tax reform. In that regard, staying within the overall TCJA construct, the Tax Foundation team has analyzed difficult, but revenue-neutral ways to build a pro-growth set of reform options that would not significantly worsen the deficit once changes to the economy are considered or substantially change the distribution of the tax burden across the income scale.
