The landmark legislation, encompassing a whopping 940-pages, has been introduced in Washington and is filled with provisions for tax incentives, spending reductions, and other key Republican initiatives, encompassing fresh funding for national defense and deportation processes. The task at hand for Congress is to evaluate whether President Donald Trump’s flagship domestic policy measure will be enacted into law.
President Trump directed Republican lawmakers, who control both chambers of Congress – the House and Senate – to forgo their holiday breaks, urging them to pass the bill by July 4th. Senators spent their weekend working diligently to push the bill through the legislative process, preparing to send it back to the House for final approval. As expected, Democrats are in unanimous opposition to the bill, and negotiations might bring about further changes.
At the core of the bill lies tax reduction measures, which Republicans argue are critical to averting a significant tax hike scheduled for December when tax perks from Trump’s first term are set to expire. Within the legislation are provisions for an estimated $3.8 trillion in tax reductions. A noteworthy proposal within the bill is making the current tax rates and brackets permanent. Moreover, it introduces temporary tax relief measures that were central to Trump’s campaign: exemptions on taxes for tips, overtime pay, certain car loans, along with an enhanced $6,000 deduction in the Senate’s version, directed at older adults with earnings up to $75,000 annually.
Notably, the Senate draft intends to raise the $2,000 child tax credit to $2,200, though lower-income families may not receive the complete credit. There’s a notable expansion of the cap on state and local tax (SALT) deductions to $40,000 over a five-year period – a provision essential for states like New York with high taxes, though the House advocated for a ten-year duration. The bill also includes numerous tax reductions for businesses.
Families in the wealthiest tax brackets would experience a $12,000 increase in their tax liabilities, whereas the lowest earners might incur a $1,600 annual loss, based on an analysis by the nonpartisan Congressional Budget Office (CBO) of the House’s version. Middle-income households are projected to receive a tax benefit ranging from $500 to $1,500, according to CBO findings.
In terms of security measures, the bill allocates approximately $350 billion for Trump’s border control and national security agenda, which includes $46 billion earmarked for the U.S.-Mexico border wall and $45 billion reserved for the creation of 100,000 beds in immigration detention facilities, fulfilling Trump’s pledge of orchestrating the most extensive deportation operation in U.S. recorded history. The bill also supports increased manpower with resources for hiring 10,000 new Immigration and Customs Enforcement officers, offering $10,000 as signing bonuses, and bolstering Border Patrol officer numbers. The aim is to achieve an annual deportation rate of 1 million individuals.
The bill proposes establishing a $10 billion fund for the homeland security secretary to provide grants to states aiding federal immigration enforcement and deportation operations. The attorney general would have access to a $3.5 billion fund, coined Bridging Immigration-related Deficits Experienced Nationwide, or BIDEN, presumably a nod to former Democratic President Joe Biden. To finance these extensive measures, immigrants might be subjected to various new fees, even while seeking asylum.
For the Pentagon, the bill directs funding for shipbuilding, munitions systems, and servicemen and women’s quality-of-life initiatives, as well as $25 billion allocated for the development of the Golden Dome missile defense system. The Department of Defense would also obtain $1 billion for border security purposes.
To mitigate the financial impact of tax reductions and new expenditures, the proposal contains spending cuts targeted chiefly at longstanding government programs such as Medicaid, food stamps, and green energy incentives, effectively unraveling achievements of the prior Democratic administration’s leaders, Biden and Barack Obama. Republicans argue their intent is to rightsize the safety net programs, focusing on populations they were initially intended to serve, primarily targeting measures against waste, fraud, and abuse.
The legislative package introduces new work requirements for adults on Medicaid and food stamps, mandating an 80-hour per month participation, including older individuals up to 65 years of age, and parents with children 14 years and older to meet these stipulations. Additional provisions include a proposed $35 copayment for Medicaid services.
Currently, Medicaid sustains approximately 80 million beneficiaries and the Supplemental Nutritional Assistance Program (SNAP) provides for 40 million users, while most of these individuals are working, analysts indicate. According to the CBO, passage of the House-passed bill might result in 10.9 million more uninsured individuals and 3 million others losing SNAP eligibility.
In an effort to address concerns of decreased Medicaid funding, the Senate draft includes a $25 billion allocation for the Rural Hospital Transformation Program, aimed at swaying undecided GOP senators and a coalition of House Republicans opposing Medicaid provider tax cuts, recognizing their detrimental potential for rural hospitals.
Both the House and Senate bills endeavor to phase back green energy tax breaks from the Biden-era directed at electric vehicles, with intentions to phase out or terminate tax credits currently used by companies to support renewable energy projects like wind and solar initiatives.
Overall, reducing Medicaid, food stamps, and green energy programs is projected to yield at least $1.5 trillion in savings.
The proposed bill also incorporates various provisions representing other GOP interests, such as the introduction of a new children’s savings initiative called Trump Accounts, entailing potential $1,000 Treasury deposits. Additionally, the Senate draft allocates $40 million for the establishment of Trump’s long-sought “National Garden of American Heroes.”
The bill introduces an excise tax on university endowments but nullifies a $200 tax on gun silencers, and short-barreled firearms. It disallows funding to family planning providers like Planned Parenthood and earmarks $88 million for a pandemic response oversight committee. Moreover, it expands the Radiation Exposure Compensation Act, championed by Missouri’s Senator Josh Hawley, catering to individuals impacted by nuclear testing and development activities.
The legislation also provides billions of dollars in funding for NASA’s Artemis moon mission and the Mars exploration program. It seeks to restrain states from implementing artificial intelligence regulations by tying certain federal AI infrastructure funds to maintaining a regulatory pause, a move opposed by 17 Republican governors.
Furthermore, an associated provision plans to raise the national debt ceiling by $5 trillion, enabling continued borrowing for existing fiscal commitments.
Upon examination, anchoring existing tax breaks and layering additional measures is calculated to accrue $3.8 trillion over a decade, according to the CBO’s assessment of the House bill, with a Senate analysis forthcoming.
The CBO estimates predict the House-approved package could enhance the nation’s deficit by $2.4 trillion across the decade. However, interpretations vary depending on accounting approaches. Senate Republicans advocate for disregarding existing tax breaks as adding new costs because they classify as “current policy.” Republicans assert authority in setting budgetary baselines resides with the Senate Budget Committee chairman. Under the Senate GOP viewpoint, the tax provisions net a $441 billion expenditure, as per congressional Joint Committee on Taxation estimates.
Nevertheless, Democrats, along with critics, dismiss this methodology as “magic math,” claiming it conceals the authentic fiscal implications of the GOP tax policies, with the Committee for a Responsible Federal Budget evaluating the Senate proposal at $4.2 trillion over a decade.