Trump tax cut extensions face GOP hurdles as key proposals take shape

[UNITED STATES] As negotiations intensify over President Donald Trump’s tax plan, several key issues are emerging, according to policy experts. On Friday evening, the House Ways and Means Committee, which oversees tax matters, released a partial draft of its section of the bill. However, the proposal could undergo substantial changes before the final vote. The full committee is scheduled to debate and move the legislation forward on Tuesday.

The timing of these discussions is crucial, as Republicans are aiming to pass the tax package before the November elections. Political analysts note that advancing the bill could help bolster Trump’s economic growth message for his campaign, while delays could push the debate into a potential lame-duck session, increasing pressure on GOP lawmakers to resolve internal disagreements quickly.

With control of the White House and both houses of Congress, Republicans have the ability to pass Trump’s proposal without Democratic support through a process known as “reconciliation.” This process bypasses the Senate filibuster, allowing a simple majority vote to move the bill forward.

However, reconciliation involves multiple steps, and proposals must remain within a tight budget framework, a challenge given the competing priorities, according to experts.

The Congressional Budget Office (CBO) has not yet provided a full cost estimate for the proposed tax measures, but early projections suggest that the extensions and expansions could add trillions to the federal deficit over the next decade. This has sparked concerns among fiscal conservatives within the GOP, already wary of the nation’s $34 trillion debt.

“The narrow Republican majority in the House will make this process very difficult,” said Alex Muresianu, senior policy analyst at the Tax Foundation, noting that just a few votes could derail the bill.

Furthermore, some lawmakers are advocating for a "more fiscally responsible package," which could alter certain provisions, according to Shai Akabas, vice president of economic policy at the Bipartisan Policy Center. As discussions continue, here are some key tax proposals that could impact millions of Americans.

Extension of Trump’s 2017 Tax Cuts

A major goal for Trump is to extend the trillions in tax breaks he introduced through the Tax Cuts and Jobs Act (TCJA) in 2017. This legislation made significant changes for both individuals and businesses, including lower tax rates, larger standard deductions, a more generous child tax credit, a higher estate and gift tax exemption, and a 20% deduction for pass-through businesses, among other measures.

Business groups, including the U.S. Chamber of Commerce, have been lobbying for permanent extensions of the TCJA’s corporate tax cuts, arguing that uncertainty undermines investment and hiring. However, progressive advocates argue that the benefits primarily favor corporations and wealthy individuals, worsening income inequality.

According to the Tax Foundation, without TCJA extensions, over 60% of taxpayers could see higher taxes in 2026. The preliminary text from the House Ways and Means Committee includes both temporary and permanent enhancements to provisions beyond the TCJA, such as increases to the standard deduction, child tax credit, tax bracket adjustments for inflation, the estate tax exemption, and the pass-through business deduction.

Expansion of the Child Tax Credit

Lawmakers are also pushing for larger tax breaks than those provided under the TCJA. “The child tax credit is one of the provisions we’re watching closely,” said Akabas. “There’s significant bipartisan support for preserving and potentially expanding it.” The TCJA temporarily increased the child tax credit to $2,000 per child under age 17, up from $1,000, and expanded eligibility. These changes are set to expire after 2025.

Advocates for low-income families argue that the current structure of the child tax credit still excludes millions of the poorest children, as it is not fully refundable. A more expansive version, like the one implemented in 2021 under President Biden, could lift millions out of poverty. However, GOP leaders have resisted such proposals, citing concerns over the cost.

In February 2024, the House passed a bipartisan bill to expand the child tax credit, increasing access and refundability, though the bill did not pass the Senate. Republicans have expressed interest in revisiting the issue. The early House Ways and Means proposal includes expanding the maximum child tax credit to $2,500 per child for four years starting in 2025.

SALT Deduction Relief

Another key element of the TCJA is the $10,000 limit on the state and local tax (SALT) deduction, which was implemented to help fund other tax cuts. This provision is also set to expire after 2025.

Before the change, taxpayers who itemized could claim an unlimited SALT deduction. However, the alternative minimum tax reduced the benefit for some higher earners.

Repealing the SALT cap has been a priority for lawmakers from high-tax states such as California, New Jersey, and New York. In a policy shift, Trump has also expressed support for a larger SALT deduction.

Some moderate Democrats have shown openness to collaborating on SALT relief, especially in competitive districts where the cap has been unpopular. However, progressive Democrats oppose it, viewing it as a benefit for wealthy homeowners that could undermine revenue needed for social programs.

“If you raise the cap, the individuals who stand to benefit the most are upper-middle-income earners, since lower-income earners typically don’t itemize deductions,” Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, previously told. The SALT deduction was not included in the preliminary House Ways and Means text, but discussions are ongoing.

Trump’s Additional Campaign Proposals

In addition to extending the TCJA, Trump has renewed calls for other tax breaks he proposed during his campaign, such as exempting tips from taxation, making overtime pay tax-free, and excluding Social Security benefits from taxes. These proposals were not included in the early draft from the House Ways and Means Committee.

The idea of exempting tips from taxation has drawn attention from service industry workers and unions, who argue that it would provide much-needed relief for low-wage earners. However, economists warn that such a policy could complicate payroll systems and reduce federal revenue by an estimated $250 billion over the next decade, depending on how it’s implemented.

There are still uncertainties about the specifics of these proposals, including potential safeguards to prevent abuse, experts say. “There’s a risk of reclassifying income to qualify for tax exemptions on tips or overtime pay,” said Muresianu. “But there are ways to mitigate the potential damage.”