Key Points

  • The House Ways and Means Committee, the primary congressional tax-writing body, is scheduled to vote Tuesday on a budget bill aimed at extending several tax cuts from President Donald Trump's first term before they expire at the end of 2025.
  • House Republican leadership hopes the bill will cut taxes by more than $4 trillion and reduce spending by $1.5 trillion over the next decade. The bill text submitted to the committee proposes,eliminating taxes on overtime pay and income from tips, effective through 2028, echoing the president's promises during his re-election campaign.
  • The bill is an updated version of a 28-page document released Friday and does not include Trump's earlier proposal to impose a 39.6% tax rate on the wealthiest Americans. Instead, it would permanently set the top rate at 37%, consistent with the level established by the president's 2017 tax-cut legislation.

In-Depth Analysis

This budget legislation lays the groundwork for much of President Trump's domestic agenda and is part of what he calls a "big, beautiful bill," covering defense, border security, and other priorities.

If combined with legislation from other Republican-controlled House committees, the bill as written would increase the federal debt by $6 trillion, or by $7 trillion if the provisions are made permanent (according to an analysis by the Committee for a Responsible Federal Budget).

The Committee for a Responsible Federal Budget said after the preliminary version was released Saturday that, without offsets, the federal debt as a share of gross domestic product (GDP) would rise to 134% by 2034, up from 117% under current law.

"Such high levels of borrowing could significantly raise interest rates, slow economic growth, and trigger a debt spiral," the committee said in a report Saturday. "Lawmakers should make necessary adjustments to the proposed tax extensions and offsets to ensure the final bill does not add to the debt or rely on budget gimmicks."

House Republican leadership aims to cap revenue losses at $4.5 trillion. However, rank-and-file Republicans—including budget hawks and more moderate colleagues—are divided on several budget provisions.

The former favor cutting Medicaid benefits for the poor, while the latter want to raise the cap on state and local tax (SALT) deductions above $30,000 in the bill released Monday. They are also open to Trump's proposal to break with party orthodoxy by raising taxes on the wealthy.

The bill would also eliminate clean energy tax credits, temporarily increase the standard deduction, and raise the estate tax exemption from $5 million to $15 million.

Additionally, the bill proposes raising the maximum child tax credit from $2,000 to $2,500 and increasing the deduction for qualified business income from 20% to 22%.