Trump’s ‘Big, Beautiful Bill’ Hits the Senate — Here’s What They Kept and Cut

Republicans in Congress are developing a tax bill, dubbed "The One, Big, Beautiful Bill," aiming to deliver on Trump's economic promises by extending key provisions of the 2017 Tax Cuts and Jobs Act, including lower income tax rates, and increasing the child tax credit. The bill also introduces new measures such as "Trump Accounts" for children and exemptions for taxes on tips and overtime, subject to certain caps and sunset clauses; however, it would eliminate the EV tax credit. A Congressional Budget Office score estimates the House version of the bill would add $3.3 trillion to the national debt over 10 years, and the Senate still needs to reach a consensus on its modifications, creating uncertainty around the bill's final form and passage.

Analysis

Congressional Republicans are advancing a significant tax legislative package, "The One, Big, Beautiful Bill," primarily focused on extending the individual income tax rate reductions from the 2017 Tax Cuts and Jobs Act, including maintaining the 10% and 35% rates while lowering others, such as the 12% rate (from 15%) and the top 37% rate (from 39.6%), and adding an additional year of inflation adjustment to the 10%, 12%, and 22% brackets. The bill proposes new federal income tax exemptions for cash tips, capped at $25,000 annually in the Senate version with a December 31, 2028 sunset, and for overtime pay, capped at $12,500 for individuals in the Senate version with a similar sunset clause; payroll taxes on these earnings would remain. A key change is the proposed elimination of the $7,500 EV tax credit, effective December 31st under the House bill or 180 days post-enactment under the Senate version. The legislation introduces "Trump Accounts" for children under 8, permitting $5,000 annual tax-preferred contributions and a one-time $1,000 government deposit for children born between 2025 and 2028. Further fiscal adjustments include an increase in the standard deduction to $16,000 for single filers and $32,000 for couples starting in 2026, an enhanced $6,000 deduction for eligible seniors through 2028, and a new charitable deduction for non-itemizers, with the Senate proposing $1,000 for individuals and $2,000 for joint filers. The child tax credit would also be permanently increased to $2,200 per child under the Senate bill, though stricter Social Security Number requirements could impact eligibility for an estimated 2 million children. Additionally, the estate tax exemption is slated to rise to $15 million for individuals and $30 million for couples in 2026, indexed to inflation. These proposed tax reductions are substantial, but the Congressional Budget Office estimates the House version of the bill would add $3.3 trillion to the national debt over ten years. The legislative path remains uncertain, with a July 4th target for passage, as the Senate must still reconcile its version with the House bill and navigate differing demands within the Republican party; notably, some of President Trump's other tax proposals, such as eliminating taxes on Social Security benefits or raising the top tax rate for millionaires, were not included in the current bill.

Key Decisions for Investors

• Investors should closely monitor the legislative progress of this tax bill, particularly Senate amendments and the evolving probability of its enactment, given internal party negotiations and the stated July 4th target date.
• Evaluate portfolio exposure to sectors that would be directly impacted, such as potential benefits for hospitality and industries with significant tipped or overtime labor, versus headwinds for the electric vehicle industry due to the proposed elimination of tax credits.
• Consider the broader macroeconomic implications of the projected $3.3 trillion increase in national debt attributed to the House bill, including potential effects on inflation, interest rates, and long-term fiscal sustainability, which could influence investment strategies.
• Anticipate the need for significant adjustments to personal financial planning related to income taxes, standard deductions, child-related credits, and estate planning if these extensive changes are enacted.