President Donald Trump continues to press Congress to deliver a comprehensive legislative package that he's dubbed "one big, beautiful bill," with a significant emphasis on tax policy.
On his social media platform, Truth Social, Trump has championed the one reconciliation bill concept — legislation covering border security, energy policy, and tax cuts.
The president also highlighted populist tax proposals to eliminate taxes on tips and on overtime pay while framing his proposals as a way to "bring our Country back.”
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Trump has repeatedly suggested tariffs would cover the cost of the bill, positioning it as a win and continuing his economic approach from his first term. However, recent tariff announcements have rattled markets and raised concerns about a potential recession.
Meanwhile, with the 2025 legislative session in full swing, Treasury Secretary Scott Bessent recently told reporters that the U.S. House of Representatives and the U.S. Senate are working toward Trump's goal.
“We’ve got three legs to the president’s economic agenda — trade, tax, and deregulation — and we hope that we can have this tax portion done by Fourth of July,” Bessent said.
Update: The House just narrowly passed its One Big Beautiful Bill Act, meeting Speaker Mike Johnson’s (R-La.) Memorial Day (May 26) deadline for initial passage. So, attention now turns to the U.S. Senate.
Negotiations over what should be in any final bill are expected to intensify in the coming weeks.
What does all of this mean for 2025 tax reform and your tax bill going forward? Here’s more to know.
TCJA 2.0? More Trump tax cuts coming?
A cornerstone of the bill is the permanent extension of much of the Tax Cuts and Jobs Act of 2017 (TCJA, also known as the “Trump tax cuts”). Key provisions are set to expire at the end of 2025.
However, the proposed "big beautiful bill" would introduce new measures impacting various income groups.
- For example, Trump wants to eliminate taxes on tips and on overtime pay, a move that could benefit some service industry workers but cost the federal government significant revenue.
- The final bill will likely include changes to the cap on state and local tax (SALT) deductions.
Trump proposed sweeping and substantial tariff increases to offset trillions in tax cuts, which he initially announced on April 2. However, as Kiplinger has reported, tariffs can significantly increase the costs of goods and services you rely on, impacting your budget and the broader economy.
Trump's energy proposals focus on expanding drilling rights, repealing clean energy incentives (e.g., eliminating the $7,500 federal EV tax credit), and reducing environmental regulations.
The goal appears to be maximizing domestic oil and gas exports while dismantling climate policies established under the Biden administration in the Inflation Reduction Act.
For border security, the ultimate bill will likely fund border wall construction and expanded deportation and detention operations.
House passes One Big Beautiful Bill
By combining multiple policy priorities, Trump wants to increase the chances of passing his agenda despite a narrow Republican majority in the House of Representatives.
On May 12, House Republicans unveiled a first draft of Trump’s “One Big Beautiful Bill,” focusing on tax policy.
The 389-page initial package, which has since been amended and which the Joint Committee on Taxation (JCT) preliminarily estimated could cost $5 trillion over 10 years, proposes the following on some key issues:
- Making the 2017 Trump tax cuts permanent
- Temporarily raising the child tax credit from $2,000 to $2,500
- Permanently increasing the small business (Section 199A) deduction from 20% to 23%
- Raising the estate tax exemption to $15 million (currently $13.6 million). This higher exemption would be permanently extended.
- Extending the current, higher standard deduction and adding a temporary boost for several years
- Eliminating clean energy tax breaks (EV tax credit, EV chargers, solar, etc.)
- Major eligibility changes and cuts to Medicare
*This is not an all-inclusive list of proposals. Cost estimates for the bill range from $2.1 trillion to over $5 trillion over ten years.
The legislation would temporarily eliminate federal taxes on tips and overtime pay, but wouldn't repeal taxes on Social Security benefits.
There is also a new temporary deduction for auto loan interest on certain vehicles, while the federal EV tax credit and other clean energy incentives would be eliminated.
The draft bill also addresses the divisive state and local tax (SALT) deduction cap, a major issue for Republicans in high-tax states.
Just before passing the House, the proposed legislation was amended to raise the SALT deduction cap from $10,000 to $40,000 per household.
- The deduction would be limited to households earning $500,000 or less.
- (Households earning more than $500,000 would remain at the $10,000 cap.)
- Both the $40,000 cap and the $500,000 income threshold will increase by 1% annually through 2033.
There’s no mention in the bill of a new GOP tax hike on millionaires, despite Trump floating the idea of a higher bracket for incomes above $2.5 million. Instead, the legislation would permanently extend the current 37% top individual income tax rate set by the 2017 TCJA.
Now that the House has passed its bill version, the proposal moves to the U.S. Senate, where it will face revisions.
What about the Senate?
Now that the bill has cleared the House of Representatives, it advances to the Senate, where the process could look quite different.
For example, Senate leaders could break the House package into several smaller bills instead of considering one large piece of legislation. The Senate plans to use the budget reconciliation process to pass the bill with a simple majority, which sidesteps the filibuster and the need for 60 votes.
However, reconciliation comes with its own hurdles: the Senate’s Byrd Rule restricts what can be included, barring provisions that aren’t directly related to the federal budget or would add to the deficit outside an approved timeframe.
It's worth noting that back in April, Senate Republicans narrowly passed their own budget resolution.
That blueprint authorizes $5 trillion in total tax cuts ($1.5 trillion in new reductions) and raises the debt ceiling by $5 trillion. (The House approved that Senate resolution in a narrow vote on April 10.)
Key elements of that proposal include:
- TCJA Permanence: Full extension of the 2017 Trump tax cuts expiring in 2025
- Border Security: $175 billion for wall construction and deportation forces
- Energy: Repeal of Biden-era EV tax credit and clean energy incentives
- Process: Bypasses Senate parliamentarian rules to fast-track legislation
Additionally worth noting: On May 20, the Senate unanimously passed the No Tax on Tips Act. For more information, see: New 'No Tax on Tips' Bill Approved: What to Know Now.
So, key hurdles for Trump's One Big, Beautiful bill remain, not the least of which is Medicaid.
Medicaid cuts
House Republicans’ version of Trump’s “One Big Beautiful Bill” proposes major cuts (directs $800 billion in reductions) and eligibility changes to Medicaid.
- For example, the bill would require able-bodied adults without dependents to work or participate in approved activities for at least 80 hours each month to keep their coverage.
- States would also have to check Medicaid recipients’ eligibility twice a year, rather than once.
- That could lead to more people losing coverage if they fail to respond or no longer qualify.
The legislation would also freeze the use of provider taxes, a financial maneuver states use to maximize federal Medicaid dollars, and prohibit Medicaid funds from being used for gender-affirming care for minors.
The draft plan would also block reimbursements for abortion-related services at organizations like Planned Parenthood.
The bill doesn’t yet mention imposing per-capita spending caps or cutting the federal match rate for states.
However, once fully fleshed out, the proposal could face opposition from some Republican lawmakers concerned about its impact on Medicaid recipients in their districts. Critics argue it could lead to millions losing healthcare coverage.
For instance, Nebraska Rep. Don Bacon, a key moderate in House GOP negotiations, reportedly told the White House that he wouldn't back Medicaid cuts exceeding $500 billion. The proposal directs cuts/savings of $880 billion.
Further complicating matters, the Congressional Budget Office warns that permanently extending the 2017 tax cuts could add $4.6 trillion to the national debt over the next decade — a figure that has energized Democratic opposition and given pause to deficit-conscious Republicans.
Sen. Josh Hawley (R-Mo.) has strongly criticized the House Republicans’ proposed cuts to Medicaid, arguing that such reductions are“morally wrong and politically suicidal.”
Hawley said slashing Medicaid to help fund Trump’s budget priorities would strip health insurance from millions of low-income Americans, including over a million Missourians, and could lead to hospital closures across the country.
Buckle up and stay tuned.
This story has been updated to reflect the latest House vote.
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