Go Deeper: Potential Tax Provisions in Focus
April 15, 2025
With the reconciliation process full steam ahead (as described in the story above), we will begin to see specific tax policy provisions introduced by lawmakers in the coming weeks.
Key provisions believed to be in contention are described below.
Reauthorize Expiring TCJA provisions: The Senate is counting this as budget neutral rather than a roughly $4 trillion cost, though the parliamentarian or House deficit hawks could balk and trigger a stalemate.
Fix the SALT Cap: The TCJA capped the federal deduction for state and local tax (SALT) at $10,000 per filer, even for joint returns.
- The GOP SALT caucus has been effective in winning over President Donald Trump and leadership in advocating to raise the $10,000 cap.
- The exact number is to be determined, but insiders are estimating a $25,000 to $50,000 range.
Trump Priorities: No tax on tips, overtime, and Social Security are in the works, though the tips and overtime may prove tricky to implement. The Social Security tax relief could also fall by the wayside if it proves too expensive.
New Taxes: The reconciliation instructions allow for $1.5 trillion in tax cuts unless they are offset. The Trump priorities and SALT cap could eat into that $1.5 trillion, so lawmakers may be forced to find new revenue. Some potential new taxes cropping up in conversations include:
- Business SALT provisions could limit or eliminate deductions on state and local income or property taxes for businesses, including passthroughs. No details have emerged on what specific form any Business SALT provision might take.
- Raising the top individual income tax rate to 39.6% from the current 37%.
- Taxing large university endowments.
Carried Interest: President Trump has put eliminating capital gains treatment for carried interest income back on the table earlier this year.
- While carried interest has key defenders in Congress, it is not clear if those supporters will risk the White House’s ire in preserving it. That said, the provision itself may not be a key priority for Trump.
- Eliminating carried interest treatment is projected to raise only $13 billion over 10 years, thus tax writers are not looking at it as a major “pay-for” in offsetting new tax cuts.
Contact
David McCarthy (
dmccarthy@crefc.org) with any questions.