President-elect Donald Trump is urging Congress to pass 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 championed the "one powerful bill" concept — legislation covering border security, energy policy, and tax cuts. The President-elect also highlighted a populist tax proposal to eliminate taxes on tips while framing his tax proposals as a way to "bring our Country back.”
As he has previously, Trump suggested the cost of the bill would be covered by tariffs, positioning it as a win and continuing the economic approach from his first term.
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But with the debt ceiling about to be breached, a super-narrow majority in the U.S. House of Representatives, and some Republicans in the U.S. Senate reportedly favoring a border-first, taxes-second approach, a massive bill addressing all of these priorities on a tight deadline seems more than ambitious. Here's more to know.
More Trump tax cuts in 'One Powerful Bill?
A cornerstone of the bill would be the permanent extension 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 also likely introduce new measures that could impact various income groups.
- For example, Trump is proposing to eliminate taxes on tips, a move that could benefit some service industry workers but cost the federal government significant revenue.
- The bill could include lifting the cap on state and local tax (SALT) deductions, a potential change that could have support from some Republican and Democrat lawmakers.
To offset the cost of tax cuts, Trump proposes substantial increases in tariffs, particularly on imports from China. However, as Kiplinger has reported, tariffs can significantly increase the costs of goods and services you rely on and impact your budget.
Trump's energy proposal would focus on expanding drilling rights, repealing clean energy incentives (e.g., possibly doing away with the $7,500 federal EV tax credit), and reducing environmental regulations. The goal seems to be to maximize domestic oil and gas exports while dismantling Biden-era climate policies in the Inflation Reduction Act.
For border security, the bill would likely fund border wall construction, increase deportation, restrict asylum processes, and potentially deploy military resources to enforce immigration.
It's worth noting that the Congressional Budget Office (CBO) has estimated that a permanent extension of the TCJA could cost $4.6 trillion over the next ten years. So, without major offsets, extending the tax cuts will likely complicate the debate over federal fiscal policy on Capitol Hill.
Border first? Republicans divided over legislative strategy
By combining multiple policy priorities, Trump apparently wants to increase the chances of passing his agenda in the face of a narrow Republican majority in the House of Representatives.
House Speaker Mike Johnson (R-La.) expressed support for this approach, saying his goal would be to pass the package within the first 100 days of Trump's term, potentially by April or May.
"We can put it all together, one big up-or-down vote, which can save the country, quite literally, because there are so many elements to it,” Johnson said in a Fox News interview.
While this may sound good to some, the bill's scope faces hurdles.
Some Republican senators, including newly minted Senate Majority Leader John Thune of South Dakota, reportedly favor a border-first approach to enacting Trump's policies.
Sen. Lindsey Graham of South Carolina recently voiced concern about combining border security with tax and energy policies.
"I'm very worried that if we don't put border first and get it done, it's going to be a nightmare for our national security," Graham said in a recent Fox News Sunday Morning interview.
He cautioned Republicans about combining border security with other policy priorities, warning that using border security as leverage for tax cuts would be "playing Russian roulette with our national security."
Additionally, the slim five-seat Republican majority in the House leaves little room for dissent within the party, and the bill's complexity will likely make it difficult to reach a consensus on all aspects of the legislation.
Whatever happens will have significant implications for U.S. tax policy and your tax bill. Buckle up and stay tuned.
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