EIW Today - May 7th, 2025

Prism Group's Daily Summary

SPENDING CUTS EMERGE AS BIGGEST BARRIER TO TAX BILL…

House Republicans are locked in a tense internal battle over proposed Medicaid cuts ahead of the Memorial Day recess, exposing deep divides between moderates and conservatives. Speaker Mike Johnson appears to be siding with moderates by likely ruling out two major cost-saving proposals — FMAP cuts and per capita caps — risking backlash from hardliners like Rep. Chip Roy and the House Freedom Caucus. While GOP leadership aims to reach $880 billion in Medicaid savings, the current slate of moderate-backed reforms, like work requirements and eligibility checks, fall short of that target. Many Republicans worry that politically risky votes will be wasted if the Senate and White House ultimately reject the cuts.

FLESHING OUT “NO TAX ON OVERTIME”… Sen. Roger Marshall (R-KS) has introduced a bill to make overtime pay tax-deductible for middle-income workers, a move aimed at advancing President Trump’s campaign pledge of “no tax on overtime.” The proposal caps the deduction at $10,000 for individuals and $20,000 for married couples, phasing out at incomes above $100,000/$200,000. This narrower version is designed to reduce fiscal impact and may be folded into a broader GOP tax package alongside other Trump-era promises like eliminating taxes on tips and Social Security benefits.

SENATE DEMS UNVEIL SMALL BIZ RELIEF LEGISLATION… A group of Senate Democrats introduced a bill to exempt small businesses from President Trump’s “Liberation Day” tariffs, warning that the sweeping duties disproportionately harm Main Street. Joined by small business owners and Minority Leader Chuck Schumer (D-NY) at a press conference, Sen. Markey (D-MA) argued that while major corporations like Apple have received tariff exemptions, small firms operating on tight margins are being left behind.

THE BIG CONCERNS OF SMALL BUSINESSES... As Indiana celebrates Small Business Week, a new report reveals a sharp decline in confidence among U.S. small business owners, with national sentiment dropping to its lowest point since 2021. According to the U.S. Chamber of Commerce’s latest index, economic pressures—chiefly inflation and uncertainty around tariffs—have dampened optimism, particularly among entrepreneurs who had hoped for relief following the election. While 66% of business owners report being comfortable with their cash flow, that's a noticeable drop from late 2024, and a record 58% now cite inflation as their top concern. Despite these headwinds, Indiana remains a bright spot: its 569,500 small businesses continue to anchor over 1.2 million jobs and contribute to the state's unique economic identity, helping the Midwest emerge as the most confident region in the nation.

IRS TECH GETS A $2B TRIM... U.S. Treasury Secretary Scott Bessent announced that the Trump administration has cut $2 billion from the IRS's information technology budget without disrupting operations. The savings were achieved by eliminating contracts and automating paper processing, aiming to reduce annual paper processing costs from $450 million to under $20 million by the end of Trump's second term. Bessent defended the proposed $2.5 billion IRS budget cut in the fiscal 2026 proposal, which also targets $163 billion in overall discretionary spending cuts, including education and healthcare. He emphasized that these measures would not compromise tax collection, highlighting the role of technological improvements and artificial intelligence in maintaining robust revenues.

THE STATE OF THE STATES

SESSIONS BY THE NUMBERS: 

Thirty-one states are in regular session. Maine is in special session.

WHAT WE'RE WATCHING: 

The Texas Legislature is deliberating Senate Joint Resolution 39 (SJR39), a proposed constitutional amendment aimed at closing a loophole that allows the governor to veto bills after the legislative session ends, without the possibility of an override. Currently, the governor has 20 days post-session to veto legislation, but only the governor can call a special session, effectively preventing the legislature from overriding such vetoes. SJR39 seeks to permit the legislature to reconvene for up to five days, 22 days after a regular session ends, specifically to address vetoed bills. The Senate passed the resolution unanimously, and if approved by the House, it will be presented to voters in the November election. 

The 94th Minnesota Legislature is considering a bill to authorize electronic driver's licenses, allowing residents to carry their IDs on smartphones. Additionally, a bipartisan coalition has proposed new regulations to increase transparency and limit the power of Homeowners Associations (HOAs). These measures reflect a broader legislative focus on modernizing state services and protecting homeowners' rights.

Rep. Hamilton Grant (D) unveiled a proposal Monday to compensate South Carolina small businesses impacted by long-delayed road construction, offering loan forgiveness to those near projects at least three years behind schedule.

Oklahoma Gov. Kevin Stitt (R) signed the Food Truck Freedom Act into law, creating a single statewide license for mobile food vendors to simplify operations and reduce regulatory burdens. The move has been praised as a win for small businesses and entrepreneurs.

LAWMAKERS... IN OR OUT? 

The House... convenes today at 10:00 AM. The full schedule may be found here. 

The Senate... convenes today at 2:30 PM. The full schedule may be found here. 

HAPPENING ON THE HILL  

The House...  

Committee on Financial Services will hold a hearing TODAY, 5/7 at 10:00 AM entitled “The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System.” 

Committee on Appropriations will hold a hearing TODAY, 5/7 at 10:00 AM entitled “Budget Hearing – U.S. Department of Agriculture.”  

Committee on Appropriations will hold a hearing TODAY, 5/7 at 10:00 AM entitled “Budget Hearing – U.S. Department of Energy” 

Committee on Appropriations will hold a hearing TODAY, 5/7 at 10:00 AM entitled “Oversight Hearing – The Federal Emergency Management Agency.” 

Committee on Appropriations will hold a hearing Thursday, 5/8 at 10:00 AM entitled, “OVERSIGHT HEARING – THE CYBERSECURITY AND INFRASTRUCTURE SECURITY AGENCY.” 

Committee on Appropriations will be holding multiple budget hearings this week. 

The Senate...      

Committee on Health, Education, Labor & Pensions will hold a hearing Thursday, 5/8 at 10:00 AM entitled, “Nominations of James O’Neill to serve as Deputy Secretary of Health and Human Services, and Janette Nesheiwat to serve as Medical Director in the Regular Corps of the Public Health Service and Surgeon General of the Public Health Service.” 

Committee on Appropriations will hold a hearing Thursday, 5/8 at 10:00 AM entitled, “A Review of the President's Fiscal Year 2026 Budget Request for the Department of Homeland Security.” 

Committee on Small Business & Entrepreneurship will hold a hearing FRIDAY, 5/9 at 10:00 AM entitled, “Small Businesses Powering the Clean Energy Economy.”  

BILLS OF INTEREST 

Rep. Victoria Spartz introduced HR 3222 to amend title XVIII of the Social Security Act to improve risk adjustment under Medicare Advantage.  

Rep. Jay Obernolte introduced HR 3220 to amend the National Quantum Initiative Act to establish a public-private partnership for near-term quantum application development and acceleration.  

Rep. Steven Horsford introduced HR 3216 to require the Secretary of Housing and Urban Development to collect and make publicly available data on properties receiving an allocation of credit under the low-income housing tax credit.  

Rep. Randy Feenstra introduced HR 3211 to amend the Food, Conservation, and Energy Act of 2008 to establish a precision agriculture loan program.  

AT THE AGENCIES

The U.S. Department of Labor 

The DOL awarded $3.5M to Florida and $3.5M to Tennessee to continue disaster-relief job creation and skills trainings for Floridians harmed by hurricanes Helene and Milton.  

The U.S. Department of the Treasury 

Secretary Bessent’s statement before the House Appropriations Subcommittee on Financial Services and General Government, highlighting the department’s efforts to boost U.S. economic growth.  

The U.S. Department of Commerce 

Check back tomorrow for possible updates. 

The U.S. Trade Representative  

Check back tomorrow for possible updates. 

The U.S. Small Business Administration 

Check back tomorrow for possible updates. 

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