By Joe Light and Brian Swint
President Donald Trump's signature tax bill advanced from the House of Representatives early Thursday. Bond investors might not like it, but the bill is only going to get more expensive from here.
The measure, which squeaked by on a 215-214 vote, now moves to the Senate, where Majority Leader John Thune (R., S.D.) has said senators plan to put their own stamp on it.
Thune and House Leader Mike Johnson have said they want to send the bill to Trump by the Independence Day holiday, though the practical deadline comes at the end of July, when lawmakers are scheduled to go on an extended recess.
The House version makes many of Trump's 2017 tax cuts permanent and creates ones for tips and overtime. It increases the standard deduction for seniors over age 65 and raises the cap on deductions for state and local taxes to $40,000 for households making less than $500,000.
To help pay for the tax breaks, the bill added work requirements to Medicaid, a move expected to reduce enrollment and save $300 billion over 10 years. It also ends some tax credits for wind and solar energy approved during former President Joe Biden's administration.
All together, though, the bill is expected to add around $4 trillion to the $36.2 trillion federal debt over the next decade.
"This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country!" wrote Trump on TruthSocial on Thursday.
The bill is far from crossing the finish line, however.
The Senate is expected to start work on its version in early June, as soon as lawmakers return from a Memorial Day recess. They'll probably make significant changes, said Stephen Myrow, managing partner of Beacon Policy Advisors.
"This is the most stringent version of the bill you're going to see," Myrow said of the House version.
One reason is because the Senate doesn't face the same constraints as the House did.
Before writing their version of the final bill, representatives approved a resolution that required them to find $1.5 trillion in spending cuts over a decade.
Senators not only dropped that requirement but decided to adopt a "current policy baseline" to calculate the cost of their bill, a move that essentially asserts that extending Trump's 2017 tax cuts costs nothing, rather than the $4 trillion that nonpartisan groups like the Bipartisan Policy Center think tank have said it would cost.
When all is said and done, the Senate bill probably will cost closer to $5 trillion than the House's $4 trillion version, Myrow said.
One potential Senate change is making a trio of business deductions that the House had set to expire in 2030 permanent. Those include 100% "bonus depreciation" for company's investments in equipment and other property, immediate expensing for research and development, and the ability to deduct net interest expenses, Myrow said.
Moderate Republicans could also push back on the cuts to Medicaid and food-stamp benefits and restore some of the cuts to clean-energy credits, in part because some of the largest projects those cuts would affect are in red-leaning states.
On the tax hike side, there's at least some chance that Republicans, who largely don't care about the SALT deduction, decide to reduce that cap from what was agreed to in the House, Myrow said.
Those potential changes will largely come without regard to the bond market, where Treasury yields have risen as the bill's expense ballooned. The 10-year Treasury yield since the end of April is up more than four-tenths of a percentage point to 4.59%.
Republicans have argued that the Congressional Budget Office, the official scorekeeper for the cost of bills, is too pessimistic, and that the breaks -- along with Trump's other policies -- will usher in an economic boom that leads to higher revenue.
"The One Big Beautiful Bill will turbocharge the economy -- just like in President Trump's first term," wrote Stephen Miran, chair of the White House's Council of Economic Advisers, in a post on X earlier this week.
The council published a report that said the bill will boost real gross-domestic product growth by 4.2 to 5.2 percentage points over the next four years.
Though Republican leaders have given themselves an Independence Day deadline to complete the bill, the real forcing mechanism comes at the end of July when lawmakers intend to head off on an August recess.
Treasury Secretary Scott Bessent has said the government probably will hit the statutory debt ceiling sometime in August. Since the tax and spending bill also raises the debt ceiling, that gives lawmakers a de facto deadline to get the bill to Trump's desk.
If the Senate revisions add even more to the bill's cost, that will no doubt infuriate the House's fiscal hawks who held out until the last minute to give their OK.
"We call on our Republican colleagues in the Senate to continue strengthening the conservative principles in this reconciliation package -- we will not look kindly on less," wrote the fiscally conservative House Freedom Caucus in a post on X after the bill passed.
That could lead to some arm-twisting by Trump, but as in past standoffs, it probably won't lead Republican lawmakers to kill Trump's signature legislation.
Write to Joe Light at joe.light@barrons.com and Brian Swint at brian.swint@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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May 22, 2025 11:46 ET (15:46 GMT)
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