The House of Representatives approved President Trump’s “big and beautiful bill” on Thursday and took it to a critical step in becoming law, sending legislation to the Senate after the last week’s changes and two tense overnight debates.
Finally, House Speaker Mike Johnson passed over more than 1,000 pages of tax cuts, the pruning of the government’s social safety net and spending in New Washington in the narrowest votes: 215-214.
Republican representatives in Ohio. Republican Rep. Andy Harris voted.
Johnson quipped Monday before the last vote before 7 a.m. ET: “Literally, it’s actually the morning in the U.S..” Trump followed up after passing, calling it “arguably the most important legislation to be ever made” and demanding prompt approval from the Senate.
The final push for the packaging started Wednesday night with a 42-page manager amendment that offers a range of changes, most notably more generous deductions for state and local taxes (salt), and stricter job requirements for Medicaid.
The plan will also raise the U.S. debt ceiling by $4 trillion and could run out by August after Treasury Secretary Scott Bessent warned the U.S. lending authority on a “warning track.”
Read more: What is the debt ceiling in the United States? How does it affect you?
The tab for all these changes will be quite substantial, with the nonpartisan Congressional Budget Office (CBO) finding the bill will result in $3 trillion in new ink over the next decade.
The CBO also released an analysis this week that said the bill's effect would cause 10% of Americans to see a 4% reduction in their household resources, mainly by cutting federal spending on Medicaid and food aid — and the top 10% would increase by 2%.
This analysis further fuels the Democratic allegation that the bill is nothing more than a gift to the rich. After the vote, Democratic House leadership slammed the plan, saying “take health care and food aid from millions of people in order to cut taxes for the rich, wealthy and good-connected taxes.”
If the bill is signed into law, the bill will also reshape many corners of the U.S. government, including new spending on action by the U.S. military to educate in areas such as Pell Grants, and elsewhere.
The bill may still see significant changes when the Senate comments. Here are some of the most important provisions in the House Bill.
The bill focused on the tax cuts for individuals included in the 2017 Tax Cuts and Jobs Act, which Trump signed the law during his first term as president.
If the bill passes, the direct effect is the continued status of taxpayers following the 2017 law, temporarily reducing the tax rates, which aims to permanently expand them. If Congress does not take action, those lower rates will expire and will reach pre-2017 levels next year.
If the bill passes, the highest income person in the United States will last for the highest interest rate of 37%. It was debated by Republicans but gave up the idea of raising interest rates for millionaires.
The bill also provides something new for individuals.
The most intense debate on taxes involves deductions on state and local taxes (salt). Finally, spokesman Johnson joined a group of Blue State Republicans and included a $40,000 salt deduction each year, up from the current annual deduction of $10,000.
President Donald Trump and House Speaker Mike Johnson after a May 20 house meeting at the U.S. Capitol (Tom Williams/CQ-Roll Call, via Getty Images) ·Tom Williams by Getty Images
The bill will also fulfill the signature of the Trump campaign, promising to eliminate taxes on tips, overtime and car loan interest. It also offers an extended standard deduction for older people after the president pledged to remove taxes on social security benefits on his campaign.
Read more: 4 ways to save your pension
Tax-free for tips and overtime clauses does not include “high-paying employees”, who have fallen to some high thresholds and have also been recently revised to include gig economy workers.
Analysts noted that many of the politically popular but expensive regulations will expire in 2029, just as Trump was supposed to leave the office as part of many temporary changes.
Other examples of temporary changes are the child tax credit that increases it to $2,500 at the current $2,000. Another is a bonus of $1,000 for the standard deduction, $15,000 to $16,000 for a single file.
Both will also expire in 2029.
The temporary nature of these changes may eventually add a lot of final tabs.
Penn Wharton's budget model examines the cost of the bill and finds a major deficit increased by $3.3 trillion in 10 years. However, if certain changes are permanent, parallel analysis can be performed, which will bring the balloon cost to $5.8 trillion in 10 years.
The biggest spending cuts in the bill focus on health care and Medicaid, including new job requirements.
The dates for these work requirements will now be “effective no later than December 31, 2026” after a series of last-minute negotiations, after the early planned 2029.
The bill also saved money by cutting the Supplementary Nutrition Assistance Program (SNAP) program, formerly known as food stamps.
The analysis found that these two changes could save more than a trillion dollars, but could also cause millions of Americans to lose health care and food benefits.
The rest of the bill involves issues such as estate and gift taxes, as well as measures to expand health savings accounts and 529 education savings accounts.
The bill also created a new savings plan for children originally called Maga (“Growth and Progress of Currency Accounts”) accounts, but then changed to something like the same political one Wednesday night: “Trump Accounts.”
Either way, these accounts will make a potential $1,000 contribution to U.S. citizens, and then make up to $5,000 per year from after-tax dollars.
But the utility of these accounts was immediately questioned, with tax experts pointing out that the existing 529 accounts have more tax advantages for parents, limiting the government’s motivation to add more money after initial donations.
House Minority Leader Hakeem Jeffries speaks in a May 21st anti-House Republican tax proposal on Capitol Hill (Family image of Countess Guimar/Getty's Billionaire) ·Jemal Countess by Getty Images
The bill also includes a range of business provisions centered around deductions such as property recovery, interest expenses, and depreciation of R&D costs.
The bill also makes the 199A deduction permanent at a new rate of 23%. This deduction (also known as through deduction) focuses on small businesses that are usually organized as S companies or partnerships.
The bill also has some new wrinkles, such as allowing a 100% fee deduction for new plants and updates to existing plants. This is late in the process, partly because the White House is led by Bessent.
Pushed from the White House earlier this year, the bill included another recent effort to tax sports franchise owners.
“The budget settlement measures extend the historical reforms of the 2017 Tax Cuts and Jobs Act (TCJA), which escalates the competitive environment for U.S. businesses and makes companies investing and growing in the U.S. more attractive,” Joshua Bolten, CEO of the Corporate Roundtable, wrote in a letter to lawmakers on Wednesday.
The bill also includes clean energy credits implemented during Biden's administration for things like solar panels and electric vehicles.
It was another controversial rule at the last minute, with the final amendment Wednesday night making these credits elimination faster, and objecting to many moderates.
The House Freedom Caucus was one of the last retainers of the parcel and spoke with reporters at the Capitol on May 21. (Andrew Harnik/Getty Images) ·Andrew Harnik by Getty Images
Another part of the bill limits states’ ability to regulate AI, saying that if the bill is passed, no state “can enforce any law or regulation to regulate AI models, AI systems or automated decision-making systems.”
Both AI and clean energy regulations are potentially key tripping points in the coming months, with some Republican senators openly alert to the rules and say they may be amended when the bill reaches the table in the coming weeks.
On the fossil fuel side, the bill also includes changes to reduce labor, open up new rental sales, and reverse excessive methane emissions expenses. Mike Sommers, CEO of the American Academy of Petroleum, cheered the passage and said in a statement: “This historic legislation is a victory for our nation’s energy future.”
The business aspect of the ledger is also noticeable for what is not included.
A heated debate on tax changes, Trump is closing the interest loophole that he carries even after the idea.
However, the tax provisions provided by this tax have not changed – a tax relief that some call the favorite of hedge fund managers – is in the case when the bill is released.
Likewise, changes in corporate tax rates are often discussed on campaign trails, but not included in the packaging. Trump often talks about lowering corporate tax rates to 15% of U.S. manufacturers, but the bill will keep corporate tax rates unchanged at 21%.
This article has been updated and provides additional developments.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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