Key Takeaways:

  • The Senate Finance Committee released a 549-page tax and spending bill that would make permanent several business-friendly tax cuts from President Trump's first term, with three provisions, known as the "Big Three," standing out.
  • According to Mark Gerson, tax policy partner at Miller & Chevalier, the bill text proposes to permanently allow 100% bonus depreciation for business capital investments, expensing of corporate research and development, and a more favorable interest deduction calculation. The House previously proposed extending these benefits through 2029.
  • Gerson said these tax breaks are a key priority for Senate Republicans and have significant bipartisan support, but they come at a high cost. "It's very expensive and has a huge impact on the deficit," Gerson said in an interview. "This could be the most controversial part."

Deep Dive:

This budget legislation lays the foundation for most of President Trump's domestic agenda, covering defense, border security, and other priorities. The version of the "One Big Beautiful Bill" passed by the House last month, as reported by CFO Dive's sister publication ESG Dive, would also further cut most clean energy production, manufacturing, and investment tax credits.

Gerson noted that the Senate text is currently undergoing a "vote-a-rama" process, where the Senate parliamentarian will hear arguments from senators about removing provisions that violate the Byrd Rule, which requires that budget reconciliation bills focus on fiscal matters.

"You could see extraneous provisions stripped from the bill to ensure it doesn't face procedural hurdles in the Senate," Gerson said. For example, according to The Wall Street Journal last Friday, the Senate parliamentarian blocked a proposal to merge the PCAOB into the SEC due to a violation of budget reconciliation rules.

The debate over the tax provisions may stem from their estimated cost, but the revenue estimates have not yet been released by the Joint Committee on Taxation, Gerson said last Friday. Earlier this week, Gerson had expected that information to be released in the coming days, describing the bill's progress as "fluid."

Gerson said the Senate text effectively serves as a "marker" or "trial balloon" to gauge support in both the House and Senate before amendments are made and it is sent to the full Senate for a vote. However, given the bill's size and the many potential amendments, Gerson does not expect the bill to pass by July 4 as some might hope. He indicated the process will likely extend later into July.