As lawmakers advance toward the critical 2025 tax cliff, a key—and increasingly contentious—policy question is coming into sharper focus: What should Congress assume about the future when it scores the cost of extending the Tax Cuts and Jobs Act (TCJA)? The answer will likely shape not only whether the TCJA’s estate and gift tax exemptions are extended, but also whether such an extension can be made permanent.
With both chambers now having passed budget resolutions—though not identical ones—the debate over baseline budgeting has become central to the legislative fate of the TCJA. For estate planners and their clients, this decision will heavily influence the timing, structure, and permanence of any estate tax relief—and how easily it can pass through Congress.
What’s at Stake: Estate and Gift Tax Exemption
As of now, the TCJA’s increased estate and gift tax exemption—currently allowing individuals to shield approximately $14 million from federal estate tax—is scheduled to sunset at the end of 2025. If Congress fails to act, the exemption will revert to about $7 million per individual, adjusted for inflation, triggering a significant expansion of estate tax liability across high-net-worth families.
But before Congress can act to extend or modify the exemption, it must answer a foundational question: Against what benchmark should the fiscal cost of that extension be measured?
Baseline Budgeting: Two Competing Approaches
The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) use a baseline to measure the budgetary impact of new legislation. That baseline can be structured in two key ways:
Current Law Baseline (Used by the House)
This approach assumes that all laws, including temporary ones, will expire as written. Under this model, the TCJA’s estate and gift tax exemption is projected to revert in 2026. Any legislation to extend it is scored as a new cost, with the estimated impact of a full TCJA extension totaling roughly $4.2 trillion over ten years.
This model is consistent with long-standing budget rules and forces lawmakers to reckon with the fiscal implications of tax policy choices.
Current Policy Baseline (Used by the Senate)
In contrast, the Senate’s recently passed FY 2025 budget resolution assumes that TCJA provisions—including the estate tax exemption—will remain in place permanently. Under this model, extending the exemption does not show up as a new cost in the budget score. It effectively assumes the tax cuts are already law.
Critics warn that this approach obscures the long-term fiscal impact of extension and biases the process in favor of deficit-financed tax cuts. It also poses procedural risks under the rules of reconciliation, which require legislation to change revenue to qualify for expedited passage.
Two Philosophies of Fiscal Discipline
This baseline debate is not just procedural—it reflects philosophical divisions within the GOP about how to handle the looming cost of TCJA extension and how aggressively to pursue spending cuts.
House: Using Baselines to Justify Deep Cuts
The House’s use of the current law baseline is not accidental—it’s part of a deliberate strategy to build pressure for spending cuts. By assuming that the TCJA expires as written, any attempt to extend it must be “paid for” with spending reductions or other revenue increases.
This reinforces the House’s broader demand for historic reductions in mandatory spending, especially in entitlement programs like Medicaid and food assistance. The current law baseline provides the fiscal scaffolding for this negotiation posture: no extension without offsets.
Senate: A Procedural Shortcut That Worries Budget Hawks
The Senate’s current policy baseline does the opposite—it masks the cost of extension and reduces the perceived need for offsets. This makes it easier to move forward politically, but harder to argue for fiscal discipline.
This approach has triggered warnings from fiscal conservatives in the Senate, who fear that the baseline choice signals an unwillingness to pursue meaningful deficit reduction. Some, like Senator Bill Cassidy, have raised alarms about the resolution’s $5.8 trillion in authorized deficits and the (comparatively paltry) $4 billion in required spending cuts—calling into question whether the Senate leadership is serious about long-term fiscal health.
In short, the choice of baseline directly informs each chamber’s posture toward spending cuts and deficit reduction. The House wants to use the baseline to drive those cuts, but the Senate’s choice appears to avoid them—at least for now.
Where Things Stand: A House-Senate Budget Standoff
As of April 2025:
- The Senate passed its FY 2025 budget resolution using a current policy baseline, enabling up to $5.8 trillion in new deficit spending—including $3.8 trillion to extend TCJA tax cuts.
- The House passed its version using a current law baseline, which treats TCJA expiration as a real revenue event that must be offset with cuts or tax hikes.
- To proceed with reconciliation, both chambers must pass an identical resolution—including the same baseline method. This remains a sticking point.
House leaders have indicated they may adopt the Senate’s resolution procedurally to allow reconciliation to move forward, while preserving flexibility to renegotiate the specifics of tax and spending policy during the drafting process. Whether that strategy will hold in the face of fiscal and ideological pressure remains to be seen.
What Estate Planners Should Do Now
While Congress debates the fine print of budget scoring, estate planners must focus on the law as it stands today: the TCJA exemption is scheduled to expire at the end of 2025.
Clients with potentially taxable estates should begin preparing now, including:
- Reviewing their current estate plans to assess exposure under a $7 million exemption
- Making strategic lifetime gifts to lock in the current exemption before it potentially vanishes
- Establishing or updating irrevocable trusts (such as SLATs, GRATs, and dynasty trusts)
- Incorporating charitable planning to manage estate size and philanthropic goals
- Creating a flexible implementation plan that can be activated quickly if the legislative picture becomes clearer later in 2025
Conclusion: A Fiscal Fork in the Road
Congress’s choice of baseline isn’t just a technicality—it’s a reflection of competing fiscal philosophies and a signal about whether deficit reduction will accompany tax relief. The House’s baseline supports its call for spending restraint; the Senate’s baseline conceals costs and defers that reckoning.
For planners, the message is clear: whether Congress ultimately extends the estate tax exemption or lets it sunset, the time to prepare is now. Let lawmakers argue over the numbers.
