The latest GOP tax bill marks a new chapter in economic policy, following closely on the heels of recent tariff negotiations. The proposal aims to deliver on President Trump’s campaign promises by extending and expanding a range of tax cuts, introducing new breaks for workers and families, and rolling out savings incentives for children. Alongside these tax changes, the bill also proposes significant spending reductions and a higher cap on the state and local tax deduction, all while sparking debate within the party and across the aisle over its potential impact on the federal deficit, social programs, and the broader economy.

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Below we highlight the key provisions outlined in the 389-page draft legislation released by the House Ways and Means Committee on May 12, 2025. We expect this draft to be modified as the bill progresses through Congress.

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Individuals:

‍Extension and Expansion of 2017 Tax Cuts and Jobs Act: The bill would make the individual, estate, and trust tax rate reductions established by the 2017 Tax Cuts and Jobs Act (TCJA) permanent (adjusted for inflation), which are set to expire at the end of 2025.

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Estate Tax Exemption: Permanently increase the estate and gift tax exemption to an inflation-indexed $15 million beginning in 2026.

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Increased Standard Deduction: The standard deduction (the amount you can subtract from your income before taxes) would go up by $1,000 for singles and $2,000 for married couples, temporarily.

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State and Local Tax (SALT) Deduction: Increase the cap from $10,000 to $30,000, with income phaseouts at $200,000 for individuals filing separately and $400,000 for married couples filing jointly. This is a key issue for people in high-tax states like New York and California, and some lawmakers want the cap to be raised even higher.

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Higher Child Tax Credit: The maximum child tax credit would be temporarily increased to $2,500 per child.

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Businesses:

Pass-Through Business Deductions: The bill addresses the expiring 20% deduction for pass-through business income. The proposal would make permanent and increase the business income deduction from 20% to 23%.

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Bonus Depreciation: The bill proposes a return to 100% bonus depreciation through 2029.

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Research and Development: The bill seeks to restore immediate expensing for domestic R&D costs through 2029.

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Other:

No Federal Tax on Tips and Overtime: If you earn tips or overtime pay, you wouldn’t owe federal income tax on that money anymore for certain industries.

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MAGA Savings Accounts for Kids: Families could put up to $5,000 a year into special savings accounts for each child under 18. The money could be used for education, buying a home, or starting a business, and it grows tax-free.

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Endowment Tax: The bill may include changes to the tax on investment income for private endowments and foundations.

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Green Energy: Phaseout and restrictions on clean energy facilities beginning in 2029. Limit or eliminate clean housing energy and vehicle credits.

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Revenue and Deficit Impact

The biggest debate – is this bill costly? Most people agree that the U.S. has a significant budget deficit issue, but there are vast differences in how to address it. One major concern is that the proposed tax bill could reduce federal revenue by trillions of dollars over the next decade, which would add to the national debt that already tops $36 trillion.

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Republican lawmakers argue that their plan won’t necessarily increase the debt because it pairs tax cuts with spending reductions and targeted tax increases. The bill includes close to $1 trillion in spending cuts over ten years, mainly by tightening Medicaid eligibility and work requirements, and it raises taxes on certain university endowments and private foundations. GOP leaders say that these measures, along with rolling back some green energy tax incentives, are designed to balance out the cost of the tax cuts. However, critics point out that many of these offsets may not fully cover the lost revenue, and they argue the bill still primarily benefits large corporations and wealthy individuals.

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What do economists think? It depends on which one you ask and their forecasting model. Supporters believe in the “trickle-down” effect - lowering taxes on businesses and individuals encourages investment, job creation, and higher wages, ultimately broadening the tax base and reducing the deficit over time. On the other hand, skeptical economists say the forecasts show little evidence that economic growth from tax cuts will be enough to offset the revenue loss.

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The biggest difference between the projections comes down to how much economic growth (and resulting tax revenue) each side expects the bill to generate. Ultimately, no one can know for sure how these assumptions will play out until a bill has been in effect for several years.

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What is certain for now is that the bill is still under negotiation, and changes are likely before any final vote. Lawmakers from both parties, as well as different factions within each party, will likely need to find common ground and compromise to address these concerns and move the legislation forward.

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So How Does the Bill Become Law?

The bill first goes to the House Ways and Means Committee. When the committee approves it, the full House of Representatives votes on it. The goal is to pass the bill by Memorial Day.

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If passed by the House, the bill goes to the Senate. The Senate can make its own changes, and then both chambers must agree on the final version. Once both the House and Senate pass the same version, it goes to President Trump to sign into law. Republicans hope to get this done by July 4th.

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The bill is being pushed through a special process called “budget reconciliation,” which lets it pass the Senate with a simple majority (no filibuster), but that means every vote counts since the Republican majority is slim - GOP leaders cannot afford to lose three or more votes.

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Conclusion

The proposed GOP tax bill attempts to cement and expand the Trump-era tax cuts, introduce new tax breaks for individuals and businesses, and fulfill several campaign promises. The legislation faces significant internal debate - especially over the SALT deduction amount and Medicaid cuts - and thus will likely undergo further modifications as it advances through Congress. The reconciliation process allows for expedited consideration, but the narrow Republican majority means that even small groups of dissenters could force changes before final passage.

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If you have questions about how these changes might affect your personal or business finances, please reach out to our advisory team. We’re monitoring developments and will keep you updated as the bill moves through Congress.

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