President Trump’s tax plans have faced a bumpy road in recent days, with Republican leaders aiming for a vote in the House of Representatives before Memorial Day, even as trillion-dollar pieces of the bill remain up in the air.
A significant boost came on Sunday evening, when the bill won approval from a key congressional committee, an unexpected victory after it hit a hurdle at a House budget hearing on Friday. Four conservative Republicans who had joined with Democrats to stall the bill decided to greenlight it while they kept up pressure for changes.
It’s all part of a grinding process, with more tax amendments likely to address concerns about the level of state and local tax (SALT) deductions. Other pieces of the bill are also under close review, such as the size and shape of Medicaid trims being considered.
Yet the overall framework of the tax plan is getting clearer by the day, with a package slowly moving forward that will cost trillions of dollars and usher in an array of changes from how taxes are paid by households to new business-world provisions.
There’s even a change to how you might save for your children, with a plan for so-called “MAGA accounts.”
The plan also would raise the nation’s debt ceiling by $4 trillion after Treasury Secretary Scott Bessent warned America’s borrowing authority is at the “warning track” and could be exhausted by August.
Read more: What is the US debt ceiling, and how does it impact you?
The goal for Speaker Mike Johnson — as he continues to face three groups of Republicans holding out over various issues — remains a full House vote before the looming recess, after which the bill will be sent to the Senate for further discussion (and surely many more changes).
“The tax bill from the House committee should be seen as an opening bid in what will be a grueling process,” Stifel chief Washington policy strategist Brian Gardner wrote in a recent note, reminding that the final goal is for passage by this summer even as other analysts suggest it could end up being closer to December.
Here’s some of the highlights from the tax piece of Trump’s “big, beautiful bill.”
The bill is centered around an extension of tax cuts for individuals contained in the 2017 Tax Cuts and Jobs Act, signed into law by Trump during his first term as president.
The immediate effect would be a continuation of the status quo for taxpayers after that 2017 law lowered rates temporarily. If Congress doesn’t act, those lower rates will expire and will go up to pre-2017 levels next year.
If the bill is passed, America’s highest earners will see a continued top rate of 37%. That comes after Republicans debated — but have discarded for now — an idea to raise the rate on millionaires.
The bill also provides some new goodies for individuals.
It would fulfill signature Trump campaign promises to eliminate taxes on tips, overtime, and car loan interest. It also offers an expanded standard deduction for seniors after Trump promised to eliminate taxes on Social Security benefits.
The no tax on tips and overtime provisions exclude “highly compensated employees” who fall above certain thresholds. The tips provisions were also recently revised to include gig economy workers, with Uber (UBER) CEO Dara Khosrowshahi saying he is “grateful” for the change.
President Donald Trump prepares to board Air Force One and return to Washington at the end of a Middle East trip on May 16. (BRENDAN SMIALOWSKI/AFP via Getty Images) ·BRENDAN SMIALOWSKI via Getty Images
Many of these provisions have also raised eyebrows as they are set to expire in 2029, just as Trump is scheduled to leave office. It’s just one of many changes that would be temporary.
One such change would increase the child tax credit to $2,500 from its current $2,000 level. Another provision includes a $1,000 bonus to the standard deduction, from $15,000 to $16,000 for single filers. Both expire in 2029 as well.
Other parts of the bill address things like estate and gift taxes, as well as measures to broaden the reach of health savings accounts and 529 education savings accounts.
The bill also creates a new savings plan for children called “Money Accounts for Growth and Advancement.”
The acronym — MAGA — is no accident.
The accounts could be jump-started for US citizens by a potential $1,000 contribution from the government and would then allow contributions of up to $5,000 annually from after-tax dollars.
It’s an idea that some lawmakers — notably Sen. Ted Cruz of Texas — have been pushing for years.
But the utility of these accounts was immediately questioned, with tax experts noting that contributions coming only from after-tax dollars and with apparently no ability to withdraw the money tax-free will limit the benefits after the government’s initial contribution.
The bill also includes a series of business-centered provisions, like new deductions for things like depreciation of property, interest expenses, and research and development costs.
The bill also makes permanent the 199A deduction at a new rate of 23%. That deduction — also known as the pass-through deduction — is focused on often smaller businesses organized as S corporations or partnerships.
The bill also has a few new wrinkles, such as allowing a 100% expensing deduction for new factories and updates to existing factories. This came late in the process, in part after a White House push led by Treasury Secretary Bessent.
“These provisions offer the certainty and support small businesses and manufacturers need to invest in America,” House Ways and Means Chairman Jason Smith said during a recent debate with the Business Roundtable, adding in a statement that the corporate provisions were a step toward a more competitive tax system for businesses.
House Speaker Mike Johnson consults his notes amid negotiations over the Republican’s reconciliation package on May 14 on Capitol Hill. (Tom Brenner for The Washington Post via Getty Images) ·The Washington Post via Getty Images
The bill also includes a rollback of a variety of clean energy credits implemented during the Biden administration for things like solar panels and electric vehicles.
It’s yet another potential tripping point in the months ahead, with some Republican senators wary of the cuts that benefit their home states and signaling that they might move to strip out those cost savings when the bill reaches their desks.
But the business side of the ledger is also notable for what is not included.
One tax change that had been hotly debated, with Trump even throwing his weight behind the idea, was closing the carried interest loophole.
But no changes to that tax provision — dubbed by some as the favorite tax break of hedge fund managers — were in the offing when the bill was released. Another Trump push for raising taxes on sports franchise owners did make it into the bill.
Likewise, changes to the corporate tax rate were often discussed on the campaign trail but are not included in the package. Trump often talked of lowering the corporate tax rate to 15% for US manufacturers, but no provisions to that effect are currently included.
Another piece of the bill, though technically in a separate Energy and Commerce committee portion, is also being watched by technology companies.
It says that no state “may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems” for a 10-year period if the bill is passed. It’s a potentially giant win for technology companies eager to minimize legal constraints.
In the tax portion of the bill, there are also provisions reflective of some of Trump’s recent culture war clashes, with a new endowment tax for some universities and a tightening of whether undocumented workers can receive certain benefits, as well as a new 5% tax on remittances paid by non-citizens to foreign countries.
Josephine Rios of California came to Washington to protest the reconciliation package, specifically potential cuts ot Medicaid. She held up a picture of her seven year old grandson Elijah who has cerebral palsy. (Jemal Countess/Getty Images for Protect Our Care) ·Jemal Countess via Getty Images
It’s an overall package — clocking in at 1,116 pages — that clearly has a ways to go before becoming law. But one thing that is already clear is a giant price tag.
The tax pieces of the bill alone are set to cost over $3.8 trillion if enacted according to the nonpartisan Joint Committee on Taxation. That’s split between $7.7 trillion in tax cuts and $3.9 trillion in tax-specific offsets.
Once offsets elsewhere in the bill are included, the bill could lead to over $3.2 trillion in new red ink, according to an analysis from the Committee for a Responsible Federal Budget.
If many of the currently temporary cuts are extended, the costs could balloon to over $5.2 trillion over the next decade, the group found.
And that’s before final negotiations could make things even more expensive, with blue state Republicans promising to sink the bill if the state and local tax (SALT) deduction isn’t made more generous.
One proposal would raise the SALT cap to $62,000 for individuals and could cost the government more than almost all other major new Trump tax cuts combined, nearly $1 trillion over the next decade.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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