Bram Berkowitz, The Motley Fool
6 min read
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House Republicans have unveiled a massive legislative package proposing over $5 trillion in tax cuts.
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However, experts are concerned that passage of the bill could significantly increase the country's debt and fiscal deficit.
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The bond market may not react so favorably to this news, which could impact the stock market and ultimately the global financial system.
House Republicans recently unveiled a legislative package called The One, Big, Beautiful Bill, a phrase that President Donald Trump has used to describe what could end up being a landmark piece of legislation during his second term. Republicans will attempt to pass large parts of Trump's legislative agenda through one bill that proposes sweeping tax cuts and an increase in spending on border security, among many other initiatives.
Along with the bill, House Republicans are also looking to implement initiatives to fund the ambitious slate. Perhaps most prominently, the bill proposes over $5 trillion of tax cuts. While these tax cuts could certainly put more money in the pockets of many Americans and businesses, they may also come with unintended consequences.
The legislative package first and foremost will look to make the tax cuts in Trump's Tax Cuts and Job Act of 2017 permanent. This bill, one of the blockbusters passed in Trump's first term, lowered individual tax brackets anywhere from between 1% to 4%. It significantly lowered and set one single corporate tax rate at 21%, implemented a larger standard deduction, and phased in the child tax credit at a lower income bar, among many other tax cuts.
The new bill also incorporates new tax cuts including temporarily increasing the child tax credit by $500 to $2,500, temporarily making earnings from tips tax deductible, eliminating taxes on overtime wages, and increasing the small business pass-through deduction from 20% to 23%, just to name some of the additional cuts.
While taxes are front and center, the bill would also touch on other areas. It would phase out various tax credits on electric vehicles, which had been a big part of former President Joe Biden's Inflation Reduction Act. It would also increase funding for border security, including the construction of a border wall in between the U.S. and Mexico, the hiring of many more Border Patrol and Immigration and Customs Enforcement (ICE) agents, and the deportation and detention of illegal immigrants.
Republicans are also simultaneously attempting to find ways to fund all of these initiatives. This is a major point of contention because Republicans have tasked The Energy and Commerce Committee, which oversees Medicaid, the federal health insurance program for lower-income Americans, with finding $880 billion of savings over the next decade. Many including the nonpartisan Congressional Budget Office have found that this would not be possible without cuts to Medicaid.
