Tax Reform and Fiscal Policy: Comparing the House Tax Bill and the Budget Reconciliation Package
- Bob Montes
- May 23
- 2 min read
Curious about how recent tax and spending legislation aligns with long-term fiscal trends?
This comparison breaks down the mechanics of the House Ways and Means Tax Bill and the broader reconciliation package. Follow us for ongoing analysis of federal policy, budget debates, and economic impacts from Capitol Hill.
The House Ways and Means Committee's tax bill and the broader budget reconciliation package, collectively known as the "One Big Beautiful Bill Act" (OBBBA), represent significant fiscal initiatives in the 119th Congress. While both aim to implement President Trump's fiscal agenda, they differ in scope, focus, and fiscal impact.
House Ways and Means Tax Bill
Overview:
The Ways and Means Committee's tax bill, passed by the House on May 22, 2025, extends and expands several provisions of the 2017 Tax Cuts and Jobs Act (TCJA). It is designed to be revenue-neutral, with tax cuts offset by spending reductions.
Key Provisions:
Individual Tax Cuts: Extends TCJA's lower individual tax rates and increases the standard deduction.
Corporate Tax Cuts: Restores 100% bonus depreciation and allows immediate expensing of R&D costs.
Pass-Through Business Deduction: Increases the Section 199A deduction from 20% to 22%.
Estate Tax Exemption: Raises the exemption amount from $5 million to $15 million.
State and Local Tax (SALT) Deduction: Removes the $10,000 cap, benefiting high-income taxpayers.
Social Security Benefits: Proposes eliminating income taxes on Social Security benefits.
Fiscal Impact:The bill is projected to add approximately $5 trillion to deficits through 2034, exceeding the $4.5 trillion limit set by the House budget resolution.
Budget Reconciliation Package (OBBBA)
Overview:
The OBBBA encompasses the Ways and Means tax bill and additional spending and policy reforms. It passed the House on May 22, 2025, by a narrow margin of 215–214.
Key Components:
Defense Spending: Allocates an additional $150 billion for defense.
Border Security: Provides $70 billion to enhance border enforcement.
Healthcare and Social Programs: Implements stricter eligibility for Medicaid and SNAP, potentially removing millions from these programs.
Tax Provisions: Includes the tax cuts from the Ways and Means bill, such as the SALT deduction repeal and Social Security tax elimination.
Fiscal Impact:The reconciliation package is estimated to increase the federal debt by approximately $3.8 trillion over the next decade.
Comparative Analysis
Aspect | House Ways and Means Tax Bill | Budget Reconciliation Package (OBBBA) |
|---|---|---|
Scope | Focused on tax policy | Comprehensive package including tax and spending |
Tax Cuts | Extends and expands TCJA provisions | Includes tax cuts from Ways and Means bill |
Spending Cuts | Aims for $2 trillion in spending reductions | Implements significant cuts to Medicaid and SNAP |
Fiscal Impact | Adds ~$5 trillion to deficits | Increases debt by ~$3.8 trillion |
Passage Date | May 22, 2025 | May 22, 2025 |
House Vote | 215–214 | 215–214 |
Conclusion
While the House Ways and Means tax bill focuses primarily on tax reforms, the OBBBA offers a broader fiscal strategy that combines tax cuts with significant spending reductions. Both aim to implement key aspects of President Trump's fiscal agenda, but their differing scopes and fiscal impacts highlight the complexities of balancing tax policy with federal spending priorities. The Senate's forthcoming actions will further shape the final legislative outcome.
Comments