A comprehensive analysis released Tuesday by National Taxpayers Union (NTU) finds several areas where the Senate’s newly unveiled tax and budget reconciliation package improves upon the House-passed version. At the same time, the Senate falls short of the House in several areas, including expanding health savings accounts and quickly phasing out costly green subsidies.
The report compares the Senate bill with the House-passed version and evaluates both through the lens of taxpayer impact.
The report applauds several pro-growth provisions in the Senate version, such as making permanent full expensing and the research and development tax deduction. The Senate plan would also permanently restore a provision that would ensure more investment by allowing firms to deduct interest on debt used to finance large projects.
“The Senate plan encourages long-term business investment in the U.S. by making growth-boosting provisions permanent,” NTU’s Executive Vice President Brandon Arnold said. “The House’s bill provides those deductions on a temporary basis. But making it permanent could double the bill’s projected economic growth effect.”
The Senate bill also places smart guardrails on “No Tax on Tips,” “No Tax on Overtime,” and “No Tax on Social Security” to reduce the potential for them to be gamed by bad faith actors while preserving the advantage for those who genuinely deserve to benefit. Furthermore, prudent limits on these provisions allow other simpler, broader-based tax relief proposals to be expanded or made permanent.
It limits the State and Local Tax (SALT) deduction cap to $10,000, instead of bloating the cap to an expensive and misguided $40,000 SALT limit as proposed by the House, although the Senate’s proposed amount is, unfortunately, likely to increase.
The Senate version also omits a problematic new tax as high as 10% imposed on foundations. The analysis encourages Congress to follow the Senate version and eliminate the foundation tax because it would hurt foundations that are providing important philanthropic services to Americans.
Where the Senate Bill Should be Improved for Taxpayers
However, the Senate bill doesn’t match the House’s expedited phaseout of green energy tax credits. The House included an aggressive phaseout of the Inflation Reduction Act (IRA) tax credits for clean energy projects, which could allow the complex credits to be claimed for years to come.
“The Biden-era green energy tax credits came from one of the most expensive bills ever enacted into law, and Congress should phase them out as soon as possible,” Arnold said.
The Senate can further improve its bill by adding the House-passed reforms to expand Health Savings Accounts for everyday Americans.
Other weaknesses in the Senate version include an increase on the debt ceiling by $5 trillion, which is $1 trillion more than the House, with insufficient accompanying budget and spending reforms.