Last week, the House of Representatives passed its version of the One Big Beautiful Bill Act (OBBBA) by a razor thin margin (215–214). The core parts of this bill will extend the strongest growth-producing measures of the 2017 Tax Cuts and Jobs Act (TCJA), including making the 2017 personal tax rates permanent. Getting this bill past the finish line before the self-imposed Memorial Day deadline was a huge feat, and a well-deserved congratulations should go out to Speaker Mike Johnson, Majority Leader Steve Scalise, Majority Whip Tom Emmer, and the entire House Republican Leadership Team. NTU highly appreciates the work it took to get this done.
That just took OBBBA one step closer to the finish line, however. The bill now must go through the Senate, and there are many questions as to how it will fare there. There will likely be pressure to both cut back on key cost-saving provisions and to lower the overall cost of the bill to the taxpayer. Considering the pressure coming from several angles within the Republican side on the bill, not even counting the high number of attacks likely to come from the Democrats, it is likely that the Senate may try to forgo at least some of the formal markup processes in the various committees of jurisdiction. We anticipate that House and Senate leadership, in combination with senior staff from Senate Finance and House Ways & Means, will try to work out some level of understanding on how far the Senate can go in making changes without risking eventual passage of a final bill on the House side.
The Senate has its work cut out, however. There will likely be efforts to dial back even the moderate efforts crafted by the House to restrain the increased rate of future increases in Medicaid and food stamp spending created by “emergency measures” in the budget busting American Rescue Plan Act back in 2021. This would be unfortunate, as a large portion of this new Medicaid and food stamp spending has been going to healthy Americans who are able to work, which takes both programs farther away from their original mission. Several of the most growth-producing business measures in OBBBA, including research and development and bonus depreciation deductions, were slated to sunset just a few years into the bill to save money. Many senators, including several in Leadership, want to make these business measures permanent to help boost future growth estimates. There will also likely be a big internal discussion among Republicans on how quickly and how deeply to cut expensive Biden-era Green New Deal tax breaks, whose benefits have mainly gone to wealthy liberals driving electric cars in blue states. Finally, we anticipate more discussions on the state and local tax (SALT) deduction changes in OBBBA, which increased costs to taxpayers and dialed back one of the most innovative changes in TCJA. There is no good reason for lower income taxpayers in red states to help subsidize the federal tax burden of wealthy liberals in blue states. State government spending should not be subsidized by the federal government.
There is also a question of how much of the House version of TCJA will get past the “Byrd rule,” where the Senate parliamentarian judges measures in a reconciliation bill to ensure that only measures that primarily impact the budget are included. We anticipate the “Byrd bath” process to strip a series of smaller measures from the bill, but most core provisions will likely get through. This process, combined with a lengthy “Vote-a-Rama” floor voting process that takes place with reconciliation bills, will take time. As a result, it is likely that the draft bill will be published not long before Senators must vote on it.
However, we think that the Senate will be successful in passing an updated OBBBA, likely sending it back to the House for passage before the July 4 recess. Whether this updated draft will be a better deal for taxpayers, or acceptable to a majority of congressmen, is anyone’s guess. We are optimistic, but we also stand ready to defend the interests of the taxpayer against costly measures that would saddle debt on future generations. Stay tuned!