The Big Beautiful Bill

The Big Beautiful Bill is back.

In the run-up to the election candidate Trump and Congressional Republicans made multiple promises to cut multiple taxes for multiple constituencies.  They cannot deliver on all of it as a consequence of a $4.5 trillion limit on the amount of money the federal budget can devote over the next decade to tax cuts. So, if you're looking forward to tax-free tips, tax-free Social Security, tax-free overtime pay and state and local tax (SALT) deductions something is gonna give.

First-off, if the GOP-controlled Congress wants to simply reauthorize the last round of tax cuts implemented during Trump 1.0 that will account for almost all of the $4.5 trillion cap leaving roughly $300 billion for everything else. 

Secondly, the GOP plan is contingent-upon an additional $2 trillion in spending cuts.  Anything less than that and the tax cuts are jeopardized.

Source: Committee for a Responsible Federal Budget | Not all proposed tax cuts are shown. | By The New York Times

 The non-partisan Committee for a Responsible Government has tallied these estimates for the next decade :

• At least $100 billion not to tax tips 
  

• At least $250 billion not to tax overtime

• At least $550 billion to lower taxes on Social Security benefits

• At least $200 billion to increase the deduction for state and local taxes

The challenge is that the sum total of these promises blows-up the budget.  Sure, Congress could end the subsidy for electric vehicles and scratch together something from that.  The trouble is that's all it is.  Scratch.  Chump change in a voluminous budget.  

Senate Republicans have floated the notion that if Congress simply reauthorize the Trump 1.0 tax cuts it doesn't cost anything. Since the old Trump tax cuts are currently in effect then maintaining the status quo costs nothing.  It is free.  Or at least that is the thinking.  If you consider that really thinking.  Just between you and me I know this brilliant thinking will blow-up the deficit and balloon the debt that any rational economist would tell you is already too large.  But I digress. 

Meanwhile, the debt ceiling looms large.  The tax cuts expire at the end of the year.  Hard deadlines make for hard work.  Time will tell.