By the thinnest of margins (215 to 214), the House of Representatives has voted to pass Trump’s domestic policy bill. According to Forbes, the ‘Big Beautiful Bill’ act has trillions of dollars of impact on US taxpayers, including renewing the tax cuts from the Tax Cuts and Jobs Act of 2017, a deduction for income earned from tips, and increased deductions for state and local income taxation, and much more. However, the bill proposes to pay for these tax cuts by limiting the benefits from social services programs like Medicaid, food stamps, and student loan payment plans. In this article, I discuss five key takeaways from its passage and what it might mean for the US and taxpayers moving forward.
1. First Term Trump Tax Cuts Are Back In Focus
Since the passage of the Tax Cuts and Jobs Act of 2017, many have circled this moment as an inflection point on the future of taxation in the US. The reason for this is because of the Byrd Rule, which, according to the Economic Policy Innovation Center, states that a reconciliation bill (not unlike the Tax Cuts and Jobs Act) cannot increase the deficit in years outside of the 10-year budget window. As the Tax Cuts and Jobs Act did, in fact, increase the deficit, the provisions from that bill could not be permanent.
This rule put significant focus on the events this year, where Congress was forced to either allow the provisions to sunset or to pass new legislation to extend those provisions, or, in the case of the Big Beautiful Bill, make those provisions permanent. According to Forbes, the most significant tax provisions for individuals that will now be extended or made permanent include lower individual income tax rates, higher standard deductions, lower mortgage interest deductions, elimination of miscellaneous itemized deductions and moving expense deductions, and an increase in the child tax credit. For corporate taxpayers, the qualified business income deduction would be renewed and increased, foreign income provisions like GILTI, FDII, and BEAT would become permanent, bonus depreciation would be renewed through 2029, and R&D could be 100% expensed through 2029.
According to the Congressional Budget Office, the Big Beautiful Bill has a preliminary expected increase to the deficit of over $3 trillion. This increase coincides with the bill also raising the debt ceiling by $4 trillion, which, as I previously wrote for Forbes, might be a significant piece contributing to the US credit rating downgrade and spooking bond markets.
2. Trump Campaign Promises Fulfilled
In addition to campaigning to extend or make many of the previous tax cuts permanent, this bill makes good on many of Trump’s other campaign promises. According to The Guardian, Trump campaigned for several tax cuts for working-class and low- and middle-income taxpayers. These included writing off overtime, tips, and the interest paid on car loans. He also campaigned for an enhanced child tax credit and a savings account. All of these promises of renewed spending and tax cuts appear in the version of the bill passed by the House.
3. Renewed Deductions For State And Local Taxes
A contentious item to the very end of the House’s passage was the deduction for state and local taxes paid. Taxpayers who are itemizing their taxes (rather than taking the standard deduction) are permitted to deduct taxes paid to state and local jurisdictions. This deduction can include many things, but the most common source is taxes paid for property ownership. Under the Tax Cuts and Jobs Act of 2017, this deduction was significantly limited to a maximum of $10,000.
The limit created significant tension among policymakers as the $10,000 applied equally to all taxpayers. While taxpayers in lower cost-of-living and low-tax states potentially viewed the $10,000 cap as reasonable, taxpayers in higher cost-of-living and high-tax states were more likely to exceed this cap, losing out on significant tax deductions. According to CNBC, in the Big Beautiful Bill, this cap was raised to $40,000 with the deduction phasing out for high-income-earning taxpayers (over $500,000). The cap would also increase annually by 1% from 2026 through 2033. As most lower-income taxpayers do not itemize their taxes and the increased deduction does not benefit higher-income households, this enhanced deduction appears to lead to significant tax relief among the middle class.
Despite the potential benefits of an enhanced state and local tax deduction, this is a provision to watch as the bill moves to the Senate. According to Politico, many in the other chamber are weary over this particular provision, and it could be met with friction.
4. A Cut To Social Services Like Medicaid, SNAP, And Student Loans
To pay for such sweeping tax decreases, the House had to make cuts in spending, and many of these cuts pertained to social services. MSNBC reports that the bill cuts federal funding for SNAP by $267 billion and Medicaid by $700 billion. Between 8 and 15 million people would lose health care coverage among these cuts. This would result in household resources among the poorest taxpayers declining by over 4% in the next eight years. The Big Beautiful Bill would also significantly increase work requirements for Medicaid recipients.
However, the social services cut is aimed not only at those receiving government assistance for health insurance and food. As reported by Forbes, Taxpayers receiving federal student loans for college would also face very new programs and conditions for borrowing money. For instance, loans would be calculated based on the median cost of all similar college programs (rather than the specific school), loans would have a maximum amount of $50,000 for undergraduate (150,000 for professional programs), restrictions on who can receive loans, abolishing most student loan payment plans, and new limits on pausing student loans. These provisions will significantly affect current students and students who are still paying off their loans.
5. The Push Toward Signing The Bill Into Law On The 4th Of July
Since the moment Trump won the election, he eyed the passage of this domestic policy agenda during the first year of this term. The passage of the Big Beautiful Bill in the House is a significant step toward accomplishing this goal. The Republican party held a very thin majority in this chamber as the Republicans could only lose three votes to pass the legislation. The bill now heads to the Senate, where many other difficulties might arise. However, as it is being proposed as a budget reconciliation, the bill only needs a simple majority (rather than 60 votes) to be passed.
According to CNN, Trump eyes Independence Day as the day when he will sign the Big Beautiful Bill into law, making these changes effective for the current year. The bill getting passed the House in this razor-thin vote is a critical step toward accomplishing that goal.
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