"Very expected" similarities between the House and Senate versions of the One, Big, Beautiful Bill Act include an extension of the current tax brackets as well as the repeal of miscellaneous itemized deductions, financial planning expert Jeff Levine said Tuesday on Linkedin. Other similarities were "less anticipated, but are now reasonably likely to find themselves in the final version of the package."
Senate Finance Committee Chairman Mike Crapo, R-Idaho, released the Senate GOP bill late Monday. “This bill prevents an over-$4 trillion tax hike and makes the successful 2017 Trump tax cuts permanent, enabling families and businesses to save and plan for the future," Crapo said in a statement. “It delivers additional tax relief to middle-class families still recovering from record inflation under the Biden Administration."
The less anticipated provisions likely to be included in a final bill, Levine opined, include:
- The value of itemized deductions would be capped at 35% for the highest income taxpayers. "In other words, those in the 37% bracket would only receive a deduction of 35%," Levine said.
- The 2026 estate tax exemption would be increased to $15 million. "This is particularly notable on the Senate side, where several Republican leaders had called for a complete repeal," he wrote.
- "While the limits and rules surrounding the proposals differ between the two bills, each calls for some level of tax-free tips, tax-free overtime, and a deduction for auto loan interest."
Biggest Change
The biggest differences between the House and Senate budget bills "center on the most controversial aspects of the House-passed bill," according to Jeff Bush of The Washington Update.
"Specifically, the Senate bill would increase the debt ceiling by $5 trillion, while the House bill only raises it by $4 trillion," Bush said Tuesday in an email. "The Senate language also tightens Medicaid restrictions even further than the House bill, which may make it difficult to secure 50 votes in the Senate and could lead to more beneficiaries losing coverage."
That being said, "the biggest change, which could be a non-starter for the House, is the permanent maintenance of the $10,000" state and local tax deduction cap.
Said Bush: "If the Senate bill passes as is, I don’t foresee the House simply approving it; consequently, it seems probable that the bill will need to go to conference."
Senate Majority Leader John Thune wants to pass the bill by July 4. There's "no way" Congress will meet that deadline, said Sen. Ron Johnson, R-Wis., according to CNN.
Senate Democrats "are going to fight this [GOP bill] with everything we’ve got," Sen. Ron Wyden, D-Ore., ranking member on the Senate Finance Committee, said in a statement.
The biggest winners in the Senate GOP bill "are wealthy corporations who would get hundreds of billions of dollars in additional tax breaks on top of what they got in the House Republican bill," Wyden said. "Senate Republicans would pay for those new corporate tax breaks by making even deeper cuts to Medicaid, slashing funding for rural hospitals and other essential health care providers and throwing cash-strapped states off a funding cliff."
Qualified Business Income
As to the qualified business income deduction, "Specified Service Business Owners (e.g., owners of most white collar businesses) will MUCH prefer the House's language," Levine added on X.
"Not only would the House bill increase the potential deduction to 23% of business income (up from 20%), but it would also change the phaseout of the deduction in a way that would allow some high-income Specified Service Business owners to claim large QBI deductions," Levine said. "By contrast, the draft legislation released by the Senate [late Monday] keeps the 20% rate and merely increases the phaseout range over which the deduction is phased out for high-income Specified Service Business owners from $100k to $150k for joint filers, and from $50k to $75k for all other taxpayers."
Sen. Elizabeth Warren, D-Mass., requested on Tuesday a breakdown from the Joint Committee on Taxation, by income level, of which taxpayers benefit from the 199A qualified business income deduction.
"Section 199A is a tax deduction that was created by President Trump’s 2017 Tax Cuts and Jobs Act," Warren said in a letter. "It allows owners of certain businesses to deduct up to 20 percent of their business’ qualified income from their taxes. Republicans claim that the pass-through deduction helps small businesses that are often structured as partnerships."
However, Warren continued, "the largest beneficiaries of the pass-through deduction are large firms and wealthy individuals, who are able to afford accountants and lawyers to exploit the deduction."
Warren also asked for "the percentage of benefit, along with the size of the benefit in dollars, received by individual taxpayers who, for the last three years, made at least $1 million, $5 million, $10 million, $50 million, or $100 million."
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