After weeks of discussions, the House GOP and Speaker Mike Johnson unveiled their long-term budget blueprint, which would allow congressional committees to move forward with trillions into tax cuts and spending reductions. However, negotiations to fund the government ahead of the March 14 deadline have stalled.

Committee Advances Budget Plan

• The House Budget Committee voted late Thursday night 21-16 to advance their budget resolution, which authorizes up to $4.5 trillion in tax cuts and $2 trillion in spending cuts over the next decade. The fiscal blueprint also calls for $300 billion in new border and defense spending and a two-year extension of the debt ceiling. (Politico, Feb. 12)
  

• While Speaker Mike Johnson hopes to bring the resolution to the floor later this month, there are a number of details to hammer out that could hinder its passage. Overcoming the GOP’s extremely narrow majority in the House (218-215) will be a challenge.

• House Budget Republicans secured passage of their resolution along party lines after striking a deal with the Freedom Caucus to win over fiscal hardliners Reps. Ralph Norman (R-SC) and Chip Roy (R-TX). (Roll Call, Feb. 13)

• An amendment from Vice Chair Lloyd Smucker (R-PA) cemented the agreement by linking the size of a future tax-cut package to spending reductions. Under the modified resolution, the amount of the tax cuts would be reduced if the legislation does not include the full $2 trillion in spending reductions.

Tax Negotiations

• House Ways and Means Chair Jason Smith (R-MO) also faces a difficult road to extend key provisions in the 2017 Tax Cuts and Jobs Act (TCJA). The $4.5 trillion figure for tax cuts is not enough to permanently extend the TCJA and include President Trump’s other tax priorities. (Politico, Feb. 12)
  

• How to come up with the spending cuts to fund a permanent TCJA extension and other priorities remains a fundamental question. The budget package is expected to include significant reductions in Medicaid, which provides health benefits to low-income families and individuals.  President Trump has expressed concern with those health care cuts. (Politico, Feb. 13)

• Some estimates place the cost of the President’s additional tax priorities as high as $2 trillion. These include exempting tips, overtime pay, and Social Security benefits from tax. Tax-writers must also find a way to pay for any adjustments to the SALT limitation, which are widely understood as needed to secure Blue State Republican votes in the House. 

• Tax-writers are expected to look for other tax offsets, raising concerns that they could target issues such as the deductibility of state and local property taxes paid by businesses.

• Limits on the deductibility of property taxes would upend the federal income tax by denying a deduction for a basic cost of doing business. It would severely hurt property values, real estate markets, and the millions of Americans employed directly and indirectly by the real estate industry.

• “Capping or eliminating the federal deduction for business property taxes would be a major policy misstep,” said Roundtable President and CEO Jeffrey DeBoer. “Property taxes are not optional—they are a fundamental cost of doing business.”

• “This change would force businesses to pay federal tax on money they never actually receive, placing a heavy burden on real estate investment and development. The impact would be severe for property owners repositioning assets—such as converting office buildings into housing—where property taxes remain due even when rental income is disrupted. Losing this deduction would drive up operating costs, which would ultimately be passed to consumers through higher rents, and hindering economic growth at a time when we should be encouraging investment and revitalization," said DeBoer.

• House Republicans are also considering shorter extensions of the expiring tax cuts in a bid to fit them into the budget plan’s constraints.

• However, in a letter released Thursday, Senate Republican leaders, including Majority Leader John Thune (R-SD), Finance Chair Mike Crapo (R-ID) and seven others, said they would not support a tax package that only provides temporary relief from tax hikes. They said that any extension of the provisions due to lapse at the end of this year “must” be permanent. (Politico, Feb. 13)

• Meanwhile, congressional Democrats have attacked Republican’s tax and spending cuts as a “betrayal of the middle class,” though they have minimal power to stop the GOP’s budget plan if Republicans are able to align on a strategy. (Politico, Feb. 13)

Reconciliation

• To avoid the Senate filibuster, the tax and spending cuts will require the House and Senate to pass identical budget resolutions as part of the reconciliation process—and the Senate is pursuing its own budget proposal. (Politico, Feb. 12)
  
  
• On Wednesday, the Senate Budget Committee approved its own budget blueprint, which includes up to $345 billion in funding for border security, immigration enforcement and defense. However, the resolution punts on any sweeping tax and spending cuts. (Washington Times, Feb. 12)
  
  
• Preferring a two-step strategy over the House Republican’s plan, Senate Budget Chair Lindsey Graham (R-SC) said, “To my colleagues in the House, I hope you can pass one, big beautiful bill.” “But we’ve got to move on this issue.” (Politico, Feb. 12)
  
  
• The March 14 deadline to fund the government is fast approaching. House Appropriations Chair Tom Cole (R-OK) indicated that negotiations are ongoing, but with much activity and attention focused on budget resolutions, little progress has been made.

• If congressional leaders are unable to extend government funding before the deadline, key programs like the National Flood Insurance Program (NFIP) could lapse. (Politico, Feb. 12)

Looking Ahead

While the Senate will be in session next week after President’s Day, the House is out of session until February 24. The Roundtable will continue to follow developments on tax and budget negotiations closely.

President Trump signed a memorandum Thursday directing his advisers to calculate new global tariff levels, a move that could disrupt international trade norms and spark intense negotiations, in addition to his recently increased duty on steel and aluminum.

State of Play

• The directive considers not just existing tariffs but also foreign taxes, subsidies, and exchange rate policies that Trump views as “unfair.” His goal is to balance trade relationships and push companies to shift manufacturing back to the U.S. (AP News, Feb. 13)

• The reciprocal tariffs will not be immediately imposed, but will be customized for each foreign trading partner, based on five different areas: tariffs the nation imposes on U.S. products, unfair taxes imposed, cost to U.S. businesses and consumers from another country’s policies, exchange rates, and any other practices the trade representative’s office determines is unfair. (The Hill, Feb. 13)

• The proposed 25% duty on steel and aluminum announced Monday, set to take effect March 12, 2025, has raised concerns about higher construction costs, supply chain disruptions, and broader economic impacts on commercial real estate. (Bloomberg, Feb. 10)

• Trump's trade adviser Peter Navarro said the measures would help U.S. steel and aluminum producers and shore up America's economic and national security. (Reuters, Feb.11)

Commercial Real Estate Impact

• Tariffs may present several challenges for commercial real estate, including increased construction costs, potential project delays, and heightened uncertainty among investors.

• Higher tariffs on Chinese steel and aluminum will increase structural material costs, while tariffs on Canadian lumber will impact framing and finishing costs.

• Additionally, any trade disruptions with Mexico could further strain budgets by limiting access to affordable cement, steel, and glass. (Capright, Feb.5)

• Many commercial real estate projects depend on materials imported from Canada, including softwood lumber for framing and steel for structural components. With tariffs in place, developers are seeing their material costs surge, leading to increased project costs and delayed developments. (InvestinginCRE, Feb.7)

• The National Association of Home Builders (NAHB) projects that these tariffs could raise the cost of imported construction materials by $3-4 billion, depending on the specific rates. This increase may affect builders' ability to deliver new projects and could have implications for housing affordability. (NAHB | GlobeSt, Feb.11)

• Tariffs are expected to raise construction costs, potentially by up to 10%. This increase could lead to higher project costs and may affect the feasibility of certain developments. (GlobeSt, Feb.12)

• In an NAHB housing market index survey published last week, 64% of builders said they expected higher material costs to be an issue for them in 2025. (NationalMortgageNews, Feb.11)

Looking Ahead

• Commerce Secretary nominee Howard Lutnick, and trade representative Jamieson Greer, will evaluate within 180 days whether "remedies" are needed for reciprocal trade relations in a country-by-country report.

• The Office of Management and Budget nominee Russell Vought will submit a report on the fiscal impact of these measures within the same timeframe.

• Lutnick said the measures could be ready as soon as April 2. (NYT, Feb. 13)

The Real Estate Roundtable will continue to engage with policymakers to reduce regulatory burdens and eliminate other obstacles that are impeding development and expand America’s housing infrastructure. We will continue to provide updates as the global trade situation evolves.