The House Ways and Means Committee on Monday unveiled a fuller version of a key portion of the Republicans' sprawling legislative agenda, a tax package that incorporates several of President Donald Trump's campaign promises. This 389-page bill has quickly become a focal point of controversy, as it proposes sweeping changes to the U.S. tax system, including tax cuts, revisions to deductions, and incentives aimed at businesses.
The bill is the centerpiece of what the GOP is calling its "megabill," but it is expected to face significant pushback, particularly from within the House GOP conference. The tax provisions have already sparked intense debate among Republicans, especially regarding the proposed changes to the state and local tax (SALT) deduction.
One of the most highly anticipated details of the bill is the proposed increase to the SALT deduction cap. Under current law, individuals can deduct up to $10,000 in state and local taxes from their federal income tax, a cap that was instituted by the 2017 Tax Cuts and Jobs Act. The new bill increases this cap to $30,000 for both single and joint filers, with the deduction phased down as income rises. While some Republican moderates, particularly from high-tax states like New York, New Jersey, and California, had hoped for a larger cap—suggesting figures as high as $62,000 for single filers and $124,000 for joint filers—this proposal has already been met with resistance from both within and outside the party.
Rep. Nick LaLota (R-N.Y.), one of the most vocal critics of the SALT cap, quickly dismissed the bill's provisions, stating, “Still a hell no.” LaLota, along with other moderate Republicans, has been pushing for a larger deduction cap to address the concerns of taxpayers in high-tax blue states. However, conservative members and deficit hawks have raised concerns that increasing the SALT deduction would contribute to the national deficit.
The bill also contains several tax-related provisions long championed by President Trump. Among them, the legislation proposes eliminating taxes on tips and overtime, with these provisions set to expire by the end of 2028. Additionally, the bill aims to exempt car loan interest payments from taxation through 2028, subject to certain exceptions. Another key element is the plan to make the 2017 income tax rate reductions permanent. These reductions include marginal tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
While there had been discussions of allowing the top income tax rate to return to 39.6% (the rate prior to the 2017 tax cuts), the new bill does not include this provision. Some conservative tax groups had criticized the idea of allowing this rate to expire, and President Trump had voiced support for keeping the top rate lower. However, in a recent post on Truth Social, Trump indicated he would be "OKAY" with increasing taxes on the wealthy but seemed uncertain due to the potential political fallout.
The Ways and Means Committee is preparing to debate and advance the bill in a meeting scheduled for Tuesday at 2:30 p.m. EDT, which is expected to stretch into the night. Speaker Mike Johnson (R-La.) has expressed confidence that the GOP will meet its ambitious timeline of passing the bill before Memorial Day, despite the ongoing disagreements within the party.
Trump has been vocal in his support for the bill, urging Republicans to unite behind the proposal. In a Truth Social post on Monday morning, Trump called the legislation "GREAT" and emphasized the importance of party unity, stating, "We have no alternative, WE MUST WIN!" He also emphasized the need for Republican lawmakers to align with the committee chairs overseeing the markup of the bill's key provisions.
Another notable aspect of the bill is its proposal to increase the pass-through deduction to 23% from the current 20%. This deduction applies to businesses organized as pass-through entities, such as partnerships, LLCs, and S-corporations, which are taxed at the individual level rather than the corporate level. The National Association of Manufacturers (NAM) has praised the increased deduction, saying it will provide greater certainty for businesses and encourage growth, hiring, and investment.
However, critics argue that the GOP tax bill disproportionately benefits the wealthy and corporations. Amy Hanauer, director of the Institute on Taxation and Economic Policy, called the bill "another example of trickle-down economics," claiming it would "further enrich the rich and not much for the rest of us." She voiced concern that the bill’s tax cuts for businesses, investors, and managers may not result in broader benefits for workers and consumers.
The bill also proposes a temporary expansion of the child tax credit, increasing it to $2,500 through 2028. Additionally, the package includes a $4 trillion increase to the debt ceiling, a measure that could face significant opposition in the Senate, where the proposed ceiling is set at $5 trillion.
In an unexpected move, the bill rescinds some of the renewable energy incentives established in the Democrats’ 2022 Inflation Reduction Act. Among the provisions being cut are funds for loans aimed at developing non-fossil fuel energy technologies, as well as grants for reducing pollution and emissions in underprivileged communities. This part of the bill targets the climate justice movement and could lead to a fierce debate over environmental policies.
The GOP’s proposed tax plan also reinstates several provisions from the 2017 tax cuts that had previously expired, including immediate expensing for research and development, bonus depreciation, and interest deductibility. These provisions are expected to provide businesses with tax breaks and more favorable financial conditions, particularly for large corporations.
One controversial aspect that remains intact is the so-called "carried interest loophole." This provision allows hedge fund and private equity managers to pay taxes on their income at the preferential capital gains rate, rather than the higher ordinary income rate. Despite Trump's past criticism of the loophole, it has remained untouched in the current version of the bill.
As the House Ways and Means Committee prepares for a marathon session to debate the bill, the stage is set for a high-stakes showdown over the GOP’s proposed tax changes. With disagreements already simmering within the party, the path forward for the legislation remains uncertain. The clock is ticking toward Memorial Day, and all eyes will be on whether Republicans can resolve their internal divisions and pass a tax bill that aligns with Trump’s legislative priorities.
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