On Thursday, October 26, the House went along with the Senate budget resolution by a vote of 216-212. That resolution will allow for the fast-track reconciliation process that will allow for a deficit increase of $1.5 trillion over the next ten years. The reconciliation places time-limits on floor debate in both the House and Senate while it also makes a Senate filibuster impossible. The $1.5 trillion in increased deficits will ease the path to large tax cuts and tax changes, but to get more than $1.5 trillion in tax cuts they will have to find tax increases (closing off tax deductions and credits) to offset those cuts.

At the same time of the House action, Congressional Republicans were saying that next year would be reserved for cuts to entitlements. In interviews with Washington publications, several members of the House verified what some advocacy groups have been saying that next year will be for entitlement cuts. Budget Chair Diane Black (R-TN) will be giving up the chair since she has announced her campaign for Tennessee governor but she said that it would be the goal of the Budget Committee next year. That would make it all but certain that Medicaid will be targeted again for a block grant. Other “welfare” programs could also be targeted for cuts—at least based on what is on the list of the House Freedom Caucus which would like to tackle “welfare reform.”

The next step for Congress is an unveiling of the House Republican tax bill which may not be the same as the Senate version. That is expected later this week, on November 1, and few Republicans know exactly what is in the legislation. Chairman Brady has announced that the Committee mark-up (actual debate and voting on the bill and related amendments), will take place the following week on November 6.

The debate will now be about what tax deductions, credits and breaks to trade off. Although they have $1.5 trillion to spend in deficits, some analyses of the broad outlines of tax reform that have been released by Republican leaders indicate the package could total $5.5 trillion. Key behind-closed-doors discussions have focused on elimination or reducing deductions for state and local taxes, and restriction on deductions for 401 (k) and 403 (b) savings plans. Also being potentially eliminated are tax deductions and credits for adoptions and child care. The child care tax credit is continually confused with the separate child tax.