The One Big Beautiful Bill Act that is now in the Senate would pay for President Donald Trump’s campaign promises to make his 2017 tax cuts permanent, cut other taxes and boost spending for border security and defense.
Republican fiscal hawks say they can't vote for the bill in its current state because it will add to the deficit -- by $2.4 trillion, according to a Congressional Budget estimate released Wednesday.
In addition to no tax on tips and no tax on overtime, the bill would also repeal federal excise taxes on gun silencers and tanning services.
Here’s a breakdown of those cuts in the current form of the bill:
Making Trump tax cuts permanent: Because this is an extension of cuts in place since 2017, the average taxpayer would largely not see a change, unless the cuts were not renewed.
No tax on tips and overtime: This was one of Trump’s major campaign promises -- exempting workers who receive tips from paying federal income taxes on them, as long as they make less than $160,000 a year. The same income threshold would apply to exemptions for overtime pay and there is no cap on how much OT pay workers could claim.
Both tax breaks would expire at the end of 2028 after Trump leaves office.
Trump savings accounts: The bill creates so-called “Trump savings accounts” for parents to open for their newborn children. The contribution limit for any taxable year is $5,000. The government would provide an initial deposit of $1,000 for each newborn.
Raising the SALT cap: The bill raises the tax deduction limit for state and local taxes from $10,000 to $40,000 for joint filers making less than $500,000 per year. The cap would increase by 1% each year.
Republicans from states with high taxes like New York and California pushed House GOP leadership to further increase that cap to give their constituents a break. Fiscal hard-liners in the House warned that increasing the cap would increase the deficit. Senate Majority Leader John Thune has already signaled that the cap that came out of the House probably won't survive in the Senate.
On the campaign trail, Trump promised to eliminate the SALT cap first imposed by the 2017 tax law he signed during his first term.
Removing gun silencer tax: The bill would end the $200 excise tax imposed on the purchase or transfer of silencers and eliminate registration. The tax has been on the books since Congress passed the National Firearms Act in 1934. This is a major win for the National Rifle Association.
Repealing tax on indoor tanning: The legislation would repeal the excise tax on indoor tanning services. The 10% tax was included in the Affordable Care Act and has been in place since 2010.
Cuts to green energy incentives: The bill would reduce or eliminate green energy tax credits and other incentives that were hallmarks of President Joe Biden’s Inflation Reduction Act.
Tax credits for homeowners who purchase solar panels, wind turbines, geothermal heat pumps, energy efficient windows, and more would be eliminated. For solar and wind power, for example, homeowners are currently eligible for a tax credit worth 30% of the cost of the purchase.
The bill also eliminates tax credits for those who purchase new or used electric vehicles -- up to $4,000 for a used EV and $7,500 for new. It also ends a tax incentive for homes and businesses to install EV charging stations.
If the bill becomes law, these incentives and others would end at the end of this year.
Slashing education programs: The bill would slash $330 billion from student loan spending over the next 10 years. An income-based “Repayment Assistance Plan” will be the new standard for student loans. It also changes the Pell Grant program for low-income students by increasing the increasing the number of required credits per semester.