July 7, 2025 | Capitol Hill Weekly

This update reflects facts as of Monday morning, July 7, 2025. The situation is fluid and may change.

Congress passed last week and the President signed on July 4 the massive budget reconciliation bill known as the “One Big Beautiful Bill.” The legislation, with a $3.4 trillion net 10-year deficit cost, included a $4.5 trillion tax title.

KPMG detailed analysis of the tax title of the bill can be found on an external dedicated page, KPMG reports: Tax subtitle for “One Big Beautiful” bill. 

It was the Senate’s bill, passed by a 51-50 vote with the Vice President breaking the tie, that was ultimately enacted. Like the House bill, the Senate’s version made permanent most of the expiring TCJA individual tax cuts. It also reinstated and made permanent the key expired business tax provisions—R&D expensing, the lower cap on the deduction for interest, and bonus depreciation—while preserving the lower rate for BEAT and making extensive reforms to the GILTI and FDII. 

Senate Republicans made these and other provisions permanent with adoption of the novel “current policy baseline” through a 53-47 party-line procedural vote. That action, invoked by the chair of the Budget Committee could set the precedent for future Republican or Democratic Senate majorities.

Some important tax changes to the House bill were made by the Senate. The Senate removed the proposed retaliatory tax in section 899, in view of tentative agreement among other members of the G7 to unspecified trade concessions. The Senate also left the section 199A passthrough deduction at 20%, rather than adopt the increased 23% rate of the House bill. And the Senate, while adopting the $40,000 SALT cap of the House bill, eliminated the separate limitation on passthrough entity taxes.

Like the House, the Senate bill repeals or phases out the energy credits created by the Inflation Reduction Act. It did, however, ease the transition of some.

Among the other revenue-raising provisions of the enacted bill were increased taxes on college endowments, but at lower rates than in the House bill and omitting private foundations. The Senate also included a tax on remittances to foreign recipients, although again at a lower rate, 1% rather than the 3.5% rate of the House bill.

The revenue cost of the tax cuts and extensions was offset in part by $1.2 trillion in savings, mostly to Medicaid, Affordable Care Act subsidies, and the Supplemental Nutrition Assistance Program. Those savings, and the net deficit cost of the bill remained controversial until the end, as reflected in the narrow passage of the bill in both houses (the House vote was 218-214). The political controversy over the tax and modifications to politically popular programs like Medicaid is likely to continue into next year’s mid-term elections.

Tariffs. The President’s suspension of his April 2 slate of so-called “reciprocal tariffs” ends this week. Trade talks with many countries have been going on, but with little transparency except for the United Kingdom and Vietnam. The President’s Director of the National Economic Council, Kevin Hassett, said over the weekend that there would be announcements of tentative trade deals with some countries and statements of unspecified terms with respect to others in advance of the July 9 deadline. Treasury Secretary Scott Bessent said the reciprocal tariffs will go into effect on August 1 unless terms are accepted or agreed.