Legislative Update: GOP Eyes Tax Reform for 2025, Lawmakers Challenge Biden’s Power Plant Regulations

GOP Eyes Ambitious Tax and Regulatory Reforms for 2025

House Speaker Mike Johnson (R-LA) unveiled on June 12 an ambitious legislative plan for Republicans, should they win control of Congress and the White House in the upcoming elections. Johnson met with a “working group” that included several Senate Finance Committee Republicans.  Central to this strategy is the use of budget reconciliation, a parliamentary tool that allows for the passage of certain legislation with a simple majority, bypassing the 60-vote filibuster threshold in the Senate. Johnson aims to leverage this tool not only to extend the tax breaks from the 2017 tax overhaul that are slated to expire at the end of 2025 but also to pursue regulatory reforms and deficit reduction.

Johnson’s plan includes a proposal to cut the top corporate income tax rate further beyond the 21 percent set by the 2017 tax bill. Sen. John Thune (R-SD) said increasing the 21 percent corporate tax rate, as some have suggested, would be a mistake.  “I know there will be pressure to increase it to find [an] offset, but you know, we made that permanent for a reason,” he said.

House Majority Leader Steve Scalise (R—LA) emphasized the opportunity to push back against regulations and reduce costs for American families while acknowledging the complexity and limitations of the reconciliation process in the Senate. The Byrd Rule, which restricts the content of reconciliation bills by requring policy changes to be tied to the budget, poses a significant challenge in the Senate. In additoin, any policy changes enacted under reconciliation only apply to the length of the budget window (hence the expiration of the tax provisions).

During a Senate Budget panel hearing earlier in the day, Johnson announced his intention to advocate next year for taxing all business income, including corporate profits, at the owner or shareholder level. This initiative aims to simplify the tax code and eliminate the discrepancies in tax treatment across various business structures. He mentioned that the Joint Committee on Taxation is preparing his proposal’s budgetary analysis.

Republicans are also considering using funds from the Inflation Reduction Act’s tax credits to finance their initiatives. The plan reflects a broader strategy to roll back key aspects of the Biden administration’s legislative achievements. However, the success of this agenda depends on the GOP winning control of both chambers of Congress and the presidency, a scenario that remains uncertain.

House and Senate Lawmakers Challenge Biden’s Power Plant Regulations with CRA Resolution

On June 5, Senator Shelley Moore Capito (R-WV) and Rep. Troy Balderson (R-OH) introduced a Congressional Review Act (CRA) joint resolution (S.J. Res. 92/H. J. Res. 163) of disapproval in their perspective chambers against the Biden Administration’s regulations aimed at shutting down American power plants. This action follows the Environmental Protection Agency’s (EPA) final rules, which impose strict emissions requirements on coal-fired and newly constructed gas-fired power plants, an approach previously rejectedby the Supreme Court in West Virginia v. EPA. The lawmakers charge that the Biden administration’s “Clean Power Plan 2.0” blatantly ignores the Court’s ruling.   They also argue that the action ignores energy demand, feasibility, and cost while pushing for a radical green agenda at the expense of American families and communities. They advocate for an all-encompassing energy strategy that includes reliable baseload energy sources.

Votes on the resolutions are expected in the next few weeks. Both chambers must pass their resolutions of disapproval, which would then be sent to the President’s desk. If passed, President Joe Biden would likely veto the resolutions, requiring lawmakers to override the veto with a two-thirds majority vote.

EPA Proposes New Use Rules for Certain Chemical Substances Under TSCA

On June 11, the EPA proposed a new Significant New Use Rules (SNURs) under the Toxic Substances Control Act (TSCA) for chemical substances that were previously the subject of premanufacture notices (PMNs) and are under a TSCA Order. These SNURs mandate that individuals intending to manufacture (including import) or process these chemicals for activities identified as significant new uses must notify the EPA at least 90 days before starting those activities. This notification will trigger the EPA’s evaluation of the conditions of use specified in the notification. Furthermore, the manufacturing or processing of the chemical for significant new use cannot begin until the EPA has reviewed the notification, made a determination, and taken the necessary actions based on that determination.   Comments on the rule must be received on or before Jully 11, 2024.

New Federal Procurement Initiative Targets Plastic Waste, Falls Short of Bans

The General Services Administration (GSA) unveiled a new initiative on June 6 to reduce single-use plastic (SUP) waste and promote alternatives in federal procurement.  The finalized rule marks the first major federal contracting regulation targeting plastic waste. However, the plan stops short of imposing strict bans or phaseouts that environmental groups wanted. In the announcement, GSA explained that banning federal purchasing of polystyrene and plastic film packaging is beyond the scope of the regulation governing the Federal Supply Schedule (FSS) and procurement.  Furthermore, the agency noted the benefits of plastic packaging for certain items, including health care products.

The initiative involves the GSA adding an icon to federal procurement catalogs so contractors can specify whether they provide SUP-free packaging, either as a default or, upon request, as an alternative to single-use plastics. This rule aligns with broader federal sustainability objectives, including transitioning to a circular economy and achieving net-zero emissions in federal procurement by 2050.

The American Fuel & Petrochemical Manufacturers (AFPM), the American Chemistry Council (ACC), and the Plastics Industry Association (PLASTICS) issued a joint statement acknowledging improvements from initial proposals but expressed concern that the rule misleadingly suggests eliminating plastics is universally beneficial for the environment. They argue the new mark system fails to convey benefits to purchasers. The associations recommend that instead of targeting plastics for reduction, GSA should adopt material-neutral criteria to promote a circular economy and recyclability of all packaging and products, leveraging its procurement power without vilifying plastic products based on what they consider faulty assumptions.

EPA Responds to OIG Report with New Measures for Lead Exceedance Notifications

The EPA agreed to enhance its public notification requirements for lead-action-level exceedances in public water systems, following recommendations from its Office of the Inspector General (OIG). The OIG highlighted that without improvements, water systems would likely fail to meet the notification requirements by the October 2024 deadline. In response, EPA officials have formed a workgroup with state representatives to develop a “notification template” and pledged to closely monitor lead notifications to ensure compliance with the 24-hour public notice mandate.

The OIG’s June 10 final report revealed that the EPA was unprepared to meet these requirements, lacking a concrete plan or guidance to assist EPA regions, states, and water systems. The report recommended that the EPA establish a detailed plan and procedures to track lead-action-level exceedance information promptly. These public notification requirements are part of the Trump administration’s January 2021 lead and copper rule revisions, with the October 2024 compliance deadline set by the 2016 Water Infrastructure Improvement for the Nation (WIIN) Act. This initiative coincides with the EPA’s efforts to issue a rule for the widespread replacement of lead service lines.

Industry Wins Jurisdiction Battle Over EPA Methylene Chloride Rule in 5th Circuit

The U.S. Court of Appeals for the 5th Circuit has been selected to hear consolidated litigation over the EPA’s rule governing methylene chloride. The federal Judicial Panel on Multidistrict Litigation (JPMDL) announced the decision on June 11, marking the second time the 5th Circuit will oversee litigation concerning a Toxic Substances Control Act (TSCA) rule, following its recent assignment of the chrysotile asbestos rule. The court’s jurisdiction over these cases is significant as it will set key precedents on applying TSCA provisions, particularly regarding the mandate to address “unreasonable risk.”

This decision avoids conflicting rulings from different circuits and solidifies the 5th Circuit’s role in demarcating the EPA’s legal authority under the reformed TSCA. The court has previously set a precedent limiting EPA’s authority in a case involving per- and polyfluoroalkyl substances (PFAS). The methylene chloride rule aims to ban several uses of the solvent while imposing new worker-safety requirements, including a two parts per million (ppm) exposure limit. The outcome of this case could influence future TSCA rules for other solvents, potentially impacting a broad swath of chemical regulations.

Senate Appropriators Delay Fiscal 2025 Markups Amid Spending Disputes

Due to ongoing disputes over overall spending levels, Senate appropriators are delaying their fiscal 2025 markups until at least next month. They aim to start markups the week of July 8, after the Senate returns from its two-week July 4 recess, with the Agriculture, Military Construction-VA, and Legislative Branch measures likely being prioritized. However, the order of bills may change.

Senate Appropriations Chair Patty Murray (D-WA) and ranking member Susan Collins (R-ME) are still negotiating the topline spending levels, and subcommittees have not yet received their spending allocations. Additionally, there’s no consensus on using “side deals” for extra spending without breaching regular funding caps, complicating the bill drafting process.

The Senate’s schedule, including a break for Juneteenth and the subsequent two-week recess, further hinders the timing of markups. Disagreements on topline spending center around Republicans pushing for increased defense spending beyond the 1 percent allowed under the debt limit law and Democrats demanding equal increases for nondefense programs.

Senate Armed Services ranking member Roger Wicker (R-MS) seeks a 7 percent increase in defense spending, supported by Senate Minority Leader Mitch McConnell (R-KY), while Collins indicates a need for at least a 2.5 percent increase to cover fixed costs. Murray emphasizes the importance of funding domestic priorities such as childcare and education.

Murray could proceed with markups without Collins’ agreement but would need support from retiring independents Joe Manchin (WV) and Kyrsten Sinema (AZ). Without a bipartisan agreement, Republicans could introduce challenging amendments for vulnerable Senate Democrats. Meanwhile, the House is progressing with partisan GOP-written bills cutting nondefense spending, likely setting the stage for a prolonged standoff.

Meanwhile, the House Appropriations Committee continues subcommittee and full committee markups for its 12 FY2025 spending bills. The Energy and Water Development and Related Agencies bill is not scheduled for subcommittee markup until June 28. The House approved its first appropriations bill on June 5.   The Military Construction, Veterans Affairs, and Related Agencies Appropriations Act passed by a 209 to 197 party-line vote.