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Dive Brief:
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The Ways and Means Committee, the top tax-writing panel in the House, is set Tuesday to vote on a budget bill that would extend many of the tax cuts from President Donald Trump’s first term before they expire at the end of 2025.
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Republican leaders in the House aim through the legislation to reduce taxes by more than $4 trillion and slash spending by $1.5 trillion during the coming decade. The bill before the committee would eliminate taxes on overtime pay and tips through 2028 in line with the president’s pledges during his reelection campaign.
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An update of a 28-page document released Friday, the legislation does not include an increase in the taxes on wealthiest Americans to 39.6% as proposed by Trump. Instead, it would permanently set the top rate at 37%, as established in the president’s 2017 tax cut legislation.
Dive Insight:
The budget legislation lays the foundation for much of President Trump’s domestic agenda and is part of what he dubbed “one, big beautiful” bill encompassing defense, border security and other priorities.
When combined with legislation released by other committees in the Republican-controlled House, the legislation would increase the federal debt by $6 trillion as written and $7 trillion if made permanent.
Without offsets, federal debt would swell to 134% of gross domestic product by 2034 from 117% under current law, the Committee for a Responsible Federal Budget said Saturday after release of the initial version of the legislation.
“Such high levels of borrowing could substantially boost interest rates, slow economic growth, and spark a debt spiral,” the committee said in a report Saturday. “Lawmakers should make the necessary adjustment to proposed tax extensions and offsets to ensure the final bill does not add to the debt or rely on budget gimmicks.”
Republican leaders in the House aim to cap revenue losses to $4.5 trillion. Yet the Republican rank-and-file, including budget hawks and their more moderate colleagues, differ over several budget provisions.
The former favors cuts to Medicaid health care benefits for the poor, while the latter wants comparatively high write-offs for state and local taxes beyond the $30,000 figure included in the bill released Monday. They are also open to a Trump proposal to break with party orthodoxy and raise taxes on the wealthy.
The legislation would roll back clean-energy tax breaks, temporarily increase the standard tax deduction and raise the estate tax exception to $15 million from $5 million.
The bill would also increase the maximum child tax credit to $2,500 from $2,000, and raise the deduction for qualified business income to 22% from 20%.