On May 12, the House Ways and Means Committee released its long-anticipated reconciliation package—an expansive tax and spending bill aimed at extending the 2017 Trump tax cuts and cementing key fiscal priorities before the TCJA sunsets at the end of 2025. Among its most notable provisions: a permanent increase in the estate and gift tax exemption to $15 million per individual, indexed from 2025 onward.
While this proposal marks a milestone in the reconciliation process, its path to enactment remains fraught—not just due to procedural barriers in the Senate, but also because of mounting policy and political challenges within the House GOP itself.
The Estate and Gift Tax Provision
Section 110006 of the bill would:
- Raise the base exemption amount to $15 million per individual;
- Index it for inflation starting in 2025;
- Permanently repeal the 2026 sunset clause that would revert the exemption to ~$7 million;
- Apply to taxable years beginning after December 31, 2025.
For estate planners, this provision offers the prospect of long-term certainty. But under reconciliation, that certainty may be more rhetorical than real.
Challenges to Spending in the House Budget Reconciliation Bill from the Republican Caucus
Internal disagreements among House Republicans further complicate the reconciliation strategy. The combination of permanent tax cuts, limited offsets and a $4 trillion debt ceiling increase has exposed deep fractures in the GOP caucus.
Internal Divisions over the SALT Deduction Cap
Moderate Republicans from high-tax states (New York, New Jersey, California) have rejected the bill’s proposed $30,000 SALT deduction cap, demanding limits as high as $100,000 for joint filers. Their opposition threatens to derail the bill’s passage without major changes.
Disagreements on Spending Cuts
Fiscal conservatives are calling for aggressive reductions to Medicaid and SNAP, while others in the party resist cuts of that magnitude. With $4.5 trillion in tax cuts authorized under the budget resolution, disagreement over how to offset those costs is intensifying.
Debt Ceiling and Fiscal Optics
The bill raises the debt ceiling by $4 trillion—less than the Senate’s $5 trillion—but still a flashpoint for GOP fiscal hawks who view it as politically risky without deeper entitlement reform.
Uneven Treatment of Tax Relief
Some Republicans are frustrated that the bill makes tax cuts for corporations and high-income households permanent, while the benefits for lower- and middle-income families are time-limited. This disparity is creating intra-party friction over the bill’s perceived priorities.
Governing with a Narrow Majority
With only a handful of votes to spare, GOP leaders must balance demands from opposing factions—SALT relief for moderates, deficit control for conservatives and permanence for Trump-aligned tax cuts. That tension raises the risk that the final House version may look very different from the bill released this week.
The Byrd Rule Still Applies
Even if the bill survives the House, it faces a formidable challenge in the Byrd Rule in the Senate. As noted in earlier installments of this series, the Byrd Rule prohibits reconciliation provisions that increase the deficit beyond the ten-year budget window (ending in FY 2034) or are deemed “extraneous” to budgetary goals. While the current policy baseline—used in the Senate’s budget resolution—treats TCJA provisions as already permanent, the Byrd Rule is enforced relative to current law, not current policy.
Because extending the estate and gift tax exemption permanently would reduce revenue relative to current law in years beyond 2034, this provision is highly likely to violate the Byrd Rule unless offset or sunset.
Summary Table: Baseline vs. Byrd Rule
Likely Outcome for the Estate Tax Provision
Despite House leadership’s push for permanence, the estate tax provision is almost certain to be restructured in the Senate. Without long-term offsets, it will need to sunset by FY 2034 to comply with the Byrd Rule.
This mirrors what we’ve seen in past reconciliation bills: permanence in rhetoric, temporary relief in statute.
Estate planners should assume:
- The exemption will not be made permanent through reconciliation;
- A temporary extension (through ~2033 or 2034) is more realistic;
- Final legislative language may not emerge until late summer or early fall.
Planning Under Pressure
While Congress debates permanence, planners must act based on current law. As of today, the exemption reverts to ~$7 million on January 1, 2026. Clients should be preparing now to:
- Lock in the current exemption with strategic lifetime gifts;
- Establish SLATs, GRATs, and other irrevocable structures;
- Reassess estate plans to account for a lower exemption scenario;
- Be ready to implement contingency actions quickly as legislation develops.
Conclusion: The Politics of Permanence
The Ways and Means bill is an aggressive opening move—but the Byrd Rule, GOP infighting and the arithmetic of reconciliation all suggest that permanence is unlikely to survive intact. The estate and gift tax provision may be the crown jewel of the House bill, but the Senate still holds the scepter.
For estate planners, the takeaway is clear: plan for sunset, prepare for uncertainty, and adjust if permanence emerges as more than a political aspiration.
