GOP drafts multi-trillion dollar tax legislation

by Erik Wasson, Ari Natter and Nancy Cook

President Donald Trump’s campaign tax pledges — no taxes on tips and overtime pay, plus new tax breaks for car buyers and seniors — are the centerpiece of a multitrillion dollar package that will serve as Republicans’ signature legislative effort.

In a draft version of the tax bill released on Monday, House Republicans highlighted the president’s populist priorities in a package that would enact those cuts through 2028. The bill would also make the lower individual tax rates Trump signed in 2017 permanent.

The bill addressed a tax issue that has been dividing lawmakers since it was first restricted by Trump in 2017: the $10,000 cap on the state and local tax deduction. The plan raises the SALT limit to $30,000, but with limits for individuals earning more than $200,000 or couples making twice that. 

The proposal, notably, doesn’t include a tax hike on the wealthiest Americans, after weeks of debate among Republicans about whether to raise levies on millionaires. The bill would permanently extend the 37% top rate for individuals that was set in Trump’s 2017 tax law. That’s despite Trump telling House Speaker Mike Johnson as recently as last week that he wanted a 39.6% rate for individuals making more than $2.5 million.

“The president loves the bill. He met with Jason Smith on Friday and it’s a great first step,” top Trump economic adviser Kevin Hassett told reporters Monday, referring to the House Ways and Means Committee Chair who led the effort to craft the tax bill. 

The package — which Trump has dubbed his “one big, beautiful bill” — is the totality of his legislative agenda. The bill is officially scored as losing $3.7 trillion in revenue over 10 years, within the $4.5 trillion limit lawmakers set for themselves. But narrow Republican margins in the House mean that the president needs nearly unanimous support from his party to pass the bill.

The plan will take a big step toward advancing through the House as soon as this week, with the House Ways and Means Committee scheduled to begin debate on it on Tuesday.

Johnson told reporters Monday that the House is on track to pass the legislation by Memorial Day. It would then go the Senate where it could be subject to major revisions.

Among provisions up for debate: the amount to increase the nation’s borrowing authority. The House bill calls for a $4 trillion increase, smaller than the Senate’s preferred $5 trillion level. Lawmakers are hoping to push any additional votes on raising the debt ceiling until after the 2026 midterm elections. 

Promises Made

The draft language includes several of the unorthodox proposals that were central to Trump’s campaign message: no taxes on tipped wages — an idea he said came from a waitress — and eliminating levies on overtime pay. The plan also calls making the interest on car loans deductible, similar to how mortgage interest can be written off. But the car buyers can only claim the break on American-made vehicles, underscoring Trump’s desire to boost US manufacturing.

Trump had also campaigned on ending taxes on Social Security benefits, but that runs afoul of the budget rules Republicans are using to pass the bill. Instead, the bill provides a $4,000 bonus for seniors on top of the regular standard deduction.

One of the thorniest issues — the contentious standoff over increasing the SALT deduction — may still be up for debate. Some lawmakers representing high-tax areas want an even bigger tax break, as much as $124,000 for joint filers, a far cry from the $30,000 cap included in the legislation.

The package lays out new levies. It would impose a new tax on private foundations of up to 10% and a new tax on foreign remittance of 5%, subject to exemptions. Also on the hook for tax increases: wealthy private universities, which could see an increase in the levy on endowments from 1.4% to as high as 21% on investment income.

Multinational companies would get an extension of current lower rates on foreign profits, marking a win for corporate America.

Tax breaks benefiting the renewable energy sector are also set to be scaled back. Popular production and investment tax credits for clean electricity would be phased out by the end of 2031, and new requirements against using materials from certain foreign nations would be added. The $7,500 consumer tax credit for the purchase of an electric vehicle would be fully eliminated by the end of 2026. 

Monday’s draft bill came after the tax-writing committee released some initial provisions late Friday. Those included raising the maximum child tax credit to $2,500 from $2,000 and increasing the standard deduction, both retroactive to 2025 to put more money in voters’ pockets before the 2026 elections. 

The bill also raises the estate tax exemption to $15 million and increases the 20% deduction for closely held businesses to 23%.

While the bill would include roughly $1.5 trillion in spending cuts over the next decade, that wouldn’t come close to covering the roughly $4 trillion in tax cuts outlined in the plan, meaning it would likely add to deficits in the coming years.

Republicans have pointed to tariffs as a key source of revenue to help offset the deficit impact from the tax bill, and data out Monday showed customs duties jumped to a record $16 billion in April. The revenue won’t be officially scored as paying for the bill since the text doesn’t enact the emergency Trump tariffs into law.

Following Monday’s agreement between Beijing and Washington to deescalate the trade war, the Yale Budget Lab estimated all tariffs to date in 2025 would bring in roughly $2.3 trillion over the next decade if they remain in place, after accounting for the negative economic effects from higher levies.

Copyright Bloomberg News