The House of Representatives recently addressed a comprehensive tax bill to build on the Tax Cuts and Jobs Act of 2017. The bill focuses on individual tax benefits, many of which are set to expire at the end of 2025. The proposed legislation includes provisions such as making domestic research and experimentation expenditures fully deductible until 2029.
It also directs the Treasury to terminate the IRS Direct File program and create a task force to develop a public-private partnership with tax preparation services. The bill increases penalties for unauthorized tax return disclosures and aims to regulate the use of contingent fees in tax return preparation. It also contemplates deductions for tips and overtime, limited by income and temporary, ending with the current administration’s term.
Despite campaign promises, the bill does not include a Social Security income tax exemption. Instead, it proposes a temporary $4,000 deduction for tax years 2025 through 2028, benefiting mainly middle-income taxpayers. The child tax credit would temporarily increase to $2,500 per child for four years, then revert to the current $2,000.
As the bill moves through legislative scrutiny, its potential implications for different taxpayer groups remain a hot topic. The coming months will reveal how the proposed changes shape the landscape of US tax policy. Rep.
Chip Roy of Texas and other hard-line conservatives were frustrated with the bill’s timeline for spending cuts, accusing it of back-loading the savings while raising the federal deficit in the short term.
House debates tax reform provisions
This imbalance led to last-minute weekend negotiations to salvage what Trump calls his “big, beautiful bill.”
The House is trying to cram all of Trump’s legislative priorities into one bill, combining an extension of the 2017 tax cuts with funding for immigration enforcement and other White House priorities.
This spending requires finding at least $4 trillion in savings over the next decade. The president and his team have hesitated to make drastic cuts to social spending programs, such as the Supplemental Nutrition Assistance Program (SNAP), which they propose shifting to states. They have also been less enthusiastic about proposals that strip Americans of health care, partly due to next year’s midterm elections.
The budget bill includes a “MAGA account” for newborns, a tax refund on overtime pay, and a moratorium on tip taxes, all set to expire in 2028, aligning with the end of Trump’s term. Meanwhile, cuts, such as shifting SNAP costs to states and implementing Medicaid work requirements, are delayed until 2028 and 2029. Rep.
Roy and other conservatives’ protest likely succeeded in pushing for the Medicaid work requirements to start sooner, which could disrupt Trump’s strategy of offering immediate benefits while delaying the financial pain until after his term ends. To a small but crucial group of hard-right House Republicans, the tax and spending cut package produced by their colleagues was nothing more than a homely cop-out. They are single-mindedly focused on slashing deficits by restructuring the government to dramatically scale back social programs, whatever the political consequences.
With their party in control of the House, Senate, and White House, they view their fellow Republicans as timid, squandering a golden opportunity to turn the government’s finances around in a long overdue course correction. Instead, they see Republican leaders, catering to swing district members worried about their re-election, delivering a half-measure that falls woefully short on cuts. It remains to be seen whether the anti-deficit fundamentalists are dug in against the legislation or shopping for concessions that could allow them to claim a partial victory against deficit spending and still ultimately fall in line behind Mr. Trump.
They have earned a reputation both for revolting against their own party at crucial moments and for backing down before their intransigence kills a top Republican priority.