Anticipated Developments Regarding the One Big Beautiful Bill Legislation
The race against time is on for July 4, the day President Trump desires to sign the Republicans' grand tax and budget cut bill. The House has already endorsed its version of the "One Big Beautiful Bill Act" (OBBBA) last month, and Senate Republicans are in the midst of sorting out their version, with a vote expected at week's end. But there's a catch - both chambers must approve the exact same bill for it to make its way to Trump's desk.
This legislation holds the potential to significantly alter how people and businesses plan, invest, and grow. It's the standout piece of legislation for Trump's second term, making it essential for Republicans to pass it. The path forward is as much about politics as it is about policy, which is to be expected with major bills.
Ex-Rep. Dave Camp, a senior policy advisor within PwC’s Washington National Tax Services practice and former Chairman of the Committee on Ways and Means, knows a thing or two about the process. In March 2014, the Michigan Republican introduced the Tax Reform Act of 2014, a comprehensive tax reform proposal since the mid-80s. Prior to that, he was a member of the Joint Committee on Taxation for six years, serving as Chairman in 2011 and 2013 and Vice Chairman in 2012 and 2014.
Variations between the Houses' Bills
During a Forbes webinar last week, Camp commented on the progress of Sen. Mike Crapo (R-Idaho), who chairs the current Senate Finance Committee, saying he "really delivered on things he was talking about." Camp pointed out that permanent tax policy was a goal of Crapo's committee and it has made its way into the Senate version of the bill.
So, what's the deal with the Senate and House versions of the bill? The House and Senate versions would make permanent certain tax cuts from the Tax Cuts and Jobs Act (TCJA) passed in 2017. It would also enhance these cuts for some individuals.
Businesses have been the main beneficiaries of the TCJA's tax cuts, with most tax benefits for corporations being permanent. Permanent tax policy for businesses is a goal in the Senate's version of the bill. One provision that is set to expire at the end of the year is the 20% deduction for owners of passthrough structures, such as limited liability companies (LLCs) or S corporations, that allows them to lower their tax rate. The House and Senate versions of the bill would make the deduction permanent (and expand it).
(You can learn more about the House version of the bill here.)
The Senate version of the bill would also permanently extend and modify the depreciation deduction for businesses, with bonus depreciation only available through 2026 as it currently stands.
Scoring and Budget Resolutions
While the provisions in the bill align with what has been expected, Camp pointed out that we still don't have a final score on the Senate version. We do have a score on the House version, with the Congressional Budget Office (CBO) estimating it would increase the federal deficit by $2.8 trillion over the next decade.
The lack of scoring on the Senate side is mainly due to the bill still being fine-tuned - the Senate hasn't passed its version yet and the Parliamentarian is still reviewing it.
Dean Zerbe, National Managing Director of alliantgroup, who served as senior counsel and tax counsel to the U.S. Senate Committee on Finance from 2001 to 2008, also participated in the webinar. He emphasized the significance of scoring, stating, "The overall fiscal impact of the bill is a huge driver."
Scoring is typically handled by the Congressional Budget Office (CBO) for spending and the Joint Committee on Taxation (JCT) for revenue. Zerbe humorously noted that scoring acts like "a combination of both a dartboard and a magic eight ball."
To offset the expense, there aren't many revenue raisers in the Senate version - items like a tax on carried interest or stock buybacks, which were mentioned earlier, appear to be absent in the bill.
Unusual Circumstances in this Reconciliation Bill
The Senate and House are working under different budget resolutions, which is unusual for big "reconciliation" bills like this one. Usually, a concurrent budget resolution is created to set spending and revenue levels, helping to avoid potential roadblocks and conflicts later.
Key Players and Issues in the Bill
Sorting out the differences between the House and Senate plans can be complicated, but Camp believes there's a lot of negotiation required within the Senate. The Senate's ability to release amendments on the floor can push the process out if they don't agree on key points. That said, Camp anticipates a significant push to finalize a bill with enough votes to pass.
Zerbe agreed, saying, "This bill is critical to this administration."
The SALT deduction has become a key issue due to its potential impact on both versions of the bill. A few members of the House from high-tax states have threatened to block the bill if the cap ($10,000) doesn't rise. The Senate version keeps the cap at $10,000, which could be a sticking point during negotiations.
As for any surprises? Camp mentioned that the Senate focusing heavily on Medicaid reforms is a shock, particularly considering the more modest changes proposed in the House. The Senate also took on a more business-friendly tone and tackled some international provisions that the House skipped over.
It wasn't a shock to see both versions containing Trump's campaign promises, such as a no tax on tips and no tax on overtime. Zerbe noted that these provisions are temporary, unlike the individual TCJA provisions, which were made permanent.
Next Steps
The Parliamentarian review is currently underway, following the bill's submission. The review's length is what one might expect with a bill of this size. The Parliamentarian advises on procedural matters and sets precedents. The job, which is deliberately nonpartisan, was designed to navigate the Senate's complex rules and procedures, especially as they apply to the budget reconciliation process.
The first sentence could be: "The One Big Beautiful Bill Act (OBBBA), a significant piece of legislation that holds the potential to drastically change the way people and businesses plan, invest, and grow, is currently undergoing reconciliation between the House and Senate versions, as it moves through the political process."
The second sentence could be: "Dean Zerbe, former US Senate Committee on Finance staff and current National Managing Director of alliantgroup, emphasizes the importance of scoring, which acts as a crucial determinant of a bill's overall fiscal impact, in the ongoing process of passing the OBBBA through the General-News domain of politics."
