What’s Inside the GOP Tax Bill

The tax cuts are estimated to cost $3.7 trillion, according to the Joint Committee on Taxation—below the $4 trillion target set by congressional Republicans.

The U.S. Capitol building in Washington on May 5, 2025.Madalina Vasiliu/The Epoch Times

The House Ways and Means Committee on May 12 released the tax policy portion of the GOP megabill to implement President Donald Trump’s sweeping agenda.

The committee, which deals with taxes and other government revenue sources, is scheduled to meet on May 13 to mark up the bill in what will be a closely-watched hearing amid disagreements on aspects such as the State and Local Tax deduction, or SALT.

The tax cuts are estimated to cost $3.7 trillion, according to the Joint Committee on Taxation. This is below the $4 trillion target set by congressional Republicans. It represents Trump’s signature domestic policy plan, which he says is meant to work alongside his tariff policy to boost the U.S. economy.

“This bill delivers on what Americans voted for with President Trump’s promise to put America First – with tax policies that reward hard work, bring jobs back home, increase opportunity, and rebuild the economy for the working class,” the committee’s chairman, Rep. Jason Smith (R-Mo.), said in a statement.

Rep. Steven Horsford (D-Nev.), a member of the Ways and Means Committee, echoed the sentiments many Democrats expressed, saying in a video on social media platform X that the bill “gives the biggest tax break—a permanent tax break—to Jeff Bezos and Elon Musk.”

Because it’s being passed under reconciliation, Democratic support won’t be necessary to pass the bill. But getting enough Republicans on board in the narrowly-divided House—where House Speaker Mike Johnson (R-La.) can spare just three defections—will be a challenge.

Here is what’s inside the sweeping Ways and Means Committee legislation.

Permanent Tax Cuts

The bill would permanently codify current income tax rates, which were lowered after 2017 by the Tax Cuts and Jobs Act (TCJA), the first major legislation enacted during Trump’s first term.

The TCJA raised the standard deduction for individual taxpayers from $6,500 to $12,000 and lowered tax brackets for all income levels while lowering many itemized deductions.

Trump promised that making “the tax cuts permanent” would be a core goal during his second term.

Tax cuts from the 2017 legislation are set to expire on Dec. 31 this year. If that happened, the tax code would return to its pre-2017 rules, an eventuality that Trump and Republicans are anxious to avoid.

The Ways and Means Committee claims that taxes for most filers will increase by 22 percent if the rate cuts are not extended.

It’s the costliest part of the bill, estimated to increase the deficit by $3.15 trillion, according to the Committee for a Responsible Federal Budget. This cost will need to be offset by permanent spending cuts, which will be included elsewhere in the overall bill produced by the House Budget Committee.

Republicans have emphasized the need to prevent such a “tax hike” as their principal argument for the bill. “Americans will see the largest middle-class tax hike in history,” Johnson wrote in an op-ed last month, if the bill is not passed.

Child Tax Credit Boost Extended

The legislation would also lock in the popular doubled child tax credit for more than 40 million taxpayers, according to the House Ways and Means Committee in a breakdown of the legislation.

As part of the TCJA, the child tax credit was raised from $1,000 per dependent child to $2,000 per child.

That boost to the credit is among other provisions of the 2017 legislation that will sunset this year if they aren’t extended.

No Taxes on Tips, Overtime, or Car Loan Interest

The bill would also fulfill Trump’s 2024 campaign promises to end taxes on tips, overtime pay, and car loan interest.

The Ways and Means Committee assessed that the legislation would save the average American family $1,700 and increase real annual take-home pay for a median-income household with two children by roughly $4,000 to $5,000.

Individual workers would reportedly see an increase in real annual wages of $2,100 to $3,300 per worker.

‘MAGA Accounts’

The bill would create “Money Account for Growth and Advancement (MAGA) accounts” for tax-free savings. These accounts are essentially trusts for parents to save money for their children, who can receive the funds when they turn 18 years of age.

It lets parents create a MAGA account with a financial institution for their minor children and contribute up to $5,000 to the account annually. It’s tax-free for a period of up to 31 years, at which point control of the account must be turned over to the child.

Both the parent and children beneficiaries are required to have a Social Security Number (SSN), locking illegal immigrants out of the program.

State and Local Tax Deduction (SALT)

A point of contention among Republicans is the State and Local Tax (SALT) deduction.

The SALT deduction currently sits at $10,000, but Republicans from Democrat-controlled states like New York and California want it increased.

The text increases it to $30,000, but a group of lawmakers has said that is not enough. Rep. Mike Lawler (R-N.Y.) wants the amount increased to $100,000 for single filers and $200,000 for those who file jointly.

Conservatives, meanwhile, have criticized SALT, alleging it requires GOP-led states to subsidize high-tax Democrat states.

Eliminating Energy Tax Credits

The text would eliminate tax credits on alternative sources of energy.

This includes repealing tax credits surrounding clean energy vehicles, nuclear power, and clean hydrogen.

These credits were created under the 2022 Inflation Reduction Act, which was one of former President Joe Biden’s signature pieces of legislation.

Removing Taxpayer Benefits for Illegal Immigrants

In keeping with the Trump administration’s hawkish stance on illegal immigration, the text consists of removing taxpayer benefits for those who are in the United States illegally.

These taxpayer benefits include Obamacare, Medicaid, and Medicare.

Tax Hike on Some University Endowment Earnings

The bill would tax some college and university endowments by as much as 21 percent.

As in the 2017 tax legislation, the committee text has a 1.4 percent tax on colleges whose endowments exceeded $500,000 per student.

Additionally, schools with an endowment between more than $750,000 and $1.25 million per student would see a 7 percent tax; those between more than $1.25 million and $2 million per student would be taxed at 14 percent; and institutions that are more than $2 million per student would be taxed at 21 percent.

Harvard, Princeton, Soka University of America, Yale, Stanford, and MIT would pay the 21 percent rate, while schools like Amherst College, Williams College, Swarthmore College, and University of Notre Dame would pay the 14 percent tax.

Increasing the Debt Limit

Finally, the text includes raising the debt limit by $4 trillion. This is the limit of how much the United States can borrow to pay off its loans.

If the debt ceiling is not increased by the time what is known as the “X date” is reached, the United States would default on its loans, causing detrimental effects to both the American and global economy.

The “X date” is likely to be reached in August, Treasury Secretary Scott Bessent told Johnson in a May 9 letter.