Ten Questions on House Republicans’ Upcoming Tax Bill

As the House Ways and Means Committee prepares to mark up a major tax bill, it is important to step back and consider which priorities it will reflect — whether it will prioritize tax policies that help families meet basic needs, require corporations and the wealthy to pay a fairer share of tax, and strengthen the nation’s fiscal outlook to allow us to meet existing commitments and make high-value investments.

Numerous independent analyses have shown that the 2017 tax law, which the bill is expected to extend, was skewed to the rich, drove up deficits and debt, and failed to deliver on its economic promises.^[1] It also has proved unpopular with the public.^[2] The 2025 bill should be held to a much higher standard than the 2017 bill, given its poor record of achievement, the higher risks the country now faces due to higher levels of debt, and the more uncertain economic outlook.

President Trump’s extreme and chaotic tariff policies pose a major threat of recession and are already raising consumer prices.^[3] The President’s attacks on the rule of law, scientific and medical research, top universities and law firms, and the functioning of the federal government — including its ability to collect revenue and deliver core services — pose large additional economic risks, over both the short and long term.

Any forthcoming Ways and Means bill should respond to the current economic moment and the growing risks that families face: rising costs, increasing risks of job loss, and high uncertainty about their future financial stability. The bill also must be examined in connection with the other central pieces of the Republican economic agenda: massive cuts in health coverage, food assistance, and other forms of help for families and communities to partially offset the cost of the bill’s tax cuts.^[4]

The answers to the following ten questions will illuminate what House Republicans prioritized as they put together their signature tax bill.

Prioritizing Tax Policies That Help Families Meet Basic Needs

1. Do House Republicans block the President’s reckless global tariffs to protect their constituents and stop a potential recession?

The tariffs’ impact on consumers and the economy is already impossible to ignore. Importantly, the Ways and Means Committee has jurisdiction not only over tax policy but also over Congress’ constitutional trade policy authority.^[5] Thus, the committee can and should respond to the President’s destructive tariff policy.

Unless they are stopped, tax increases due to the tariffs are likely to more than erase any forthcoming tax cuts for households in all income groups except the top 10 percent, whose incomes are above $317,000. (See Figure 1.) Moreover, while the 2017 tax cuts won’t expire until the end of this year, households and businesses are already feeling the impact of the tariffs on prices, supply chains, and business viability.^[6]

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Soon after President Trump imposed the highest tariffs since the Smoot-Hawley tariffs of the 1930s on more than 100 countries, a number of states and businesses filed lawsuits challenging his legal authority.^[7] Yet House Republicans, despite their constitutional responsibility over tariff policy and the obvious risks the tariffs pose to their constituents, have failed to act. Meanwhile, the tariffs and the frequent shifts in the Administration’s tariff policies are paralyzing businesses, raising costs on consumers, and sharply increasing the risk of recession, which could lead to a rise in unemployment and the number of people who need help to afford the basics, just as those supports are slated for cuts.

A major question for the committee markup is whether House Republicans will, in parallel with the tax bill, assert their constitutional trade policy authority to stop these destructive policies and protect the country from a potential self-inflicted recession.

Furthermore, as Figure 1 shows, these historic tariffs represent major tax increases on households with low or moderate incomes.^[8] Given that extending the 2017 tax law would give the biggest benefits to high-income households, it will be important to see if Republicans modify the upcoming bill to reflect the current economic situation, including through measures discussed below.

2. Do House Republicans extend enhanced premium tax credits for marketplace health coverage to protect millions of people, including many small business owners, from sharp premium increases?

While the Ways and Means bill is expected to extend many other expiring tax provisions, it may not extend the premium tax credit enhancements, which are critical to making health coverage in the Affordable Care Act (ACA) marketplace more affordable.

Failing to extend them would drive up health care premiums by an average of 79 percent for over 20 million people, including 3 million small business owners.^[9] (Figure 2 shows the average premium increases nationally for a family of four at different income levels; in some states the increases would be far higher.)^[10] Roughly 4 million people would then be expected to lose their health insurance as its cost rose to unaffordable levels.^[11] As a result, they would be more likely to forgo necessary care or to incur medical debt.

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3. Do House Republicans expand the Child Tax Credit for children in working families who get less than the full credit, whom 169 House Republicans voted to help last year?

Under the Child Tax Credit now in place, 17 million children receive less than the full credit, or none at all, because their families’ earnings are too low; the large majority of these children live in families with earnings.^[12] Last year, Ways and Means Chair Jason Smith negotiated and championed legislation to expand the credit for the vast majority of these children. The bill, which passed the House, would have corrected many (but not all) key flaws in the credit’s design.^[13]

First, the bill would have improved how the credit phases in with earnings. As it stands now, higher-income families get a $2,000 credit for each child, but because of the way the phase-in works for low-income families, many families with two or three children receive roughly the same total credit as a family with one child at the same earnings level. Not allowing lower-income families to claim the credit on a per-child basis harms the roughly three-quarters of children in lower-income families who live in a family with more than one child.

Second, the bill would have treated families with low or moderate incomes the same as higher-income families when it comes to the maximum credit they can receive. Currently, these families are restricted to a smaller maximum credit. The lower maximum credit for families who don’t owe income taxes means that when they are able to increase their earnings, they often receive no additional Child Tax Credit, as they remain stuck at the lower maximum credit. This is seemingly at odds with Republicans’ rhetorical focus on increasing returns to work.

If Republicans simply increase the $2,000 maximum credit, or index it for inflation, not one of the 17 million children or their families would benefit from the change. The children who wouldn’t benefit include an estimated 650,000 children in veterans’ families, as well as millions of children whose parents work important jobs for low pay, such as truck drivers, cooks and waiters, nursing assistants, home health aides, construction workers, cashiers, and others. These children should be the top priority, not the lowest.

Some prior Republican proposals to expand the Child Tax Credit would offset the cost by cutting the Earned Income Tax Credit (EITC) for families with children and eliminating the head-of-household filing status for single parents.^[14] In effect, this would increase income support for single parents with one hand while taking away part or all of that added support with the other. The Ways and Means bill should boost the incomes of single parents, an economically precarious group — not take away support.

4. Do House Republicans prevent low-paid working adults not raising children in their homes from being taxed into poverty?

More than 6 million working adults aged 19 and older who aren’t raising children at home will be taxed into, or deeper into, poverty by federal income and payroll taxes in 2026 if House Republicans do not improve the very limited EITC for this group.^[15]

Republicans should increase the paltry size of their EITC, expand the income range for people to qualify, and expand the age range (currently 25-64) to include anyone aged 19 or older. This would help young adults entering the workforce, who currently do not qualify for any EITC, and adults aged 65 and over, many of whom continue to work but aren’t eligible for any EITC. And it would provide a larger credit for currently eligible adults aged 25 to 64.

These changes would also be consistent with the President’s attention during the campaign to the economic circumstances of young men, especially those who don’t go to college.

5. Do House Republicans protect energy tax credits that help families lower their utility bills and create economic opportunities for struggling communities?

Tax credits for investments in clean, affordable energy have spurred tremendous growth in the solar, wind, and geothermal energy industries, and they are bringing new economic opportunities to areas of the country facing underinvestment and hardship, including many rural areas.^[16] But House Republicans are reportedly considering large cuts to energy tax credits, which risks upending this progress.^[17]

Repealing these credits would result in higher utility bills for households and businesses (increases of 7 percent and 10 percent, respectively)^[18] at a time when consumers already face higher costs from the President’s tariffs. Repeal could also add up to $49 billion in annual health care costs and lost productivity.^[19]

Requiring Corporations and Wealthy Households to Pay a Fairer Share of Tax

6. Do House Republicans end costly tax cuts targeted to high-income households?

Extending the expiring individual income and estate tax provisions of the 2017 law would benefit households with considerable wealth and high incomes far more than households with low or moderate incomes. Roughly half the cost of extending the expiring tax cuts would flow to households with incomes in the top 5 percent (those with incomes over around $320,000).^[20]

This tilt to the top reflects several costly provisions that primarily benefit the most well-off:

• Lower top rate. The 2017 law cut the top individual income tax rate, which now applies to taxable incomes over roughly $730,000 for married couples, from 39.6 percent to 37 percent. Some House Republicans have reportedly considered including a higher top rate in their bill — such as 40 percent for people with taxable incomes over $1 million — but President Trump and House Speaker Mike Johnson have both rejected the idea.^[21]

  Allowing the top rate to revert to 39.6 percent while extending all of the 2017 law’s other expiring provisions would still give households in the top 1 percent a $40,000 average annual tax cut, according to the Tax Policy Center.^[22] That’s because most high-income households receive large tax cuts from the law’s other provisions, like the pass-through deduction (see below), and also benefit from the law’s rate cuts that apply to the lower tax brackets. Still, even this modest change would be a welcome departure from the failed “trickle-down” approach to tax policy.

• Pass-through deduction. The 2017 law adopted a special 20 percent deduction for certain income that owners of pass-through businesses (partnerships, S corporations, and sole proprietorships) report on their individual tax returns. Over half of the benefits go to 200,000 business owners with incomes over $1 million, who now face a lower top rate (29.6 percent) than their employees (37 percent).^[23] Research finds the deduction had no trickle-down benefits for workers’ wages or business investment.^[24]

  At a minimum, Republicans can follow through on their rhetorical support for small business owners by letting the deduction expire for millionaires, which would reduce the deduction’s cost by over $350 billion from 2025-2034, and instead extending enhanced premium tax credits that help 3 million business owners (see above) for a somewhat lower cost.^[25]

• Tax break for large estates. The 2017 law doubled the estate tax exemption to $22 million per couple and indexed it for inflation going forward; today a couple can pass on an estate worth up to $28 million tax free. Extending this generous exemption amounts to a $5.7 million tax cut for the wealthiest 1 in 1,000 estates, whose value consists largely of unrealized capital gains income that has never been taxed.

  House Republicans may double down on this costly estate tax break, with some even calling for permanently repealing the estate tax altogether.^[26] Providing tax breaks to multi-million-dollar estates would be especially egregious given that Republicans also appear poised to steeply cut vital health care and food assistance, while the President’s sweeping tariffs will cost families with low or moderate incomes hundreds if not thousands of dollars a year and drive up the likelihood of a recession.

7. Do House Republicans revisit the 2017 law’s permanent and steep cut in the corporate tax rate?

The centerpiece of the 2017 law was a deep, permanent cut in the corporate tax rate — from 35 percent to 21 percent — that cost $1.3 trillion from 2018-2027 and is tilted even more heavily toward wealthy people than the expiring individual tax cuts.^[27] (See Figure 3.) Rigorous research shows that the corporate rate cut did not produce the promised economic benefits: a study by economists from the Joint Committee on Taxation and the Federal Reserve Board found that workers in the bottom 90th percentile of their firm’s income scale saw no change in earnings from the rate cut.^[28]

Rather than revisit this costly, skewed rate cut, which was even deeper than corporate lobbyists had expected to achieve in the 2017 law,^[29] House Republicans are likely to go in the opposite direction: reverse scheduled business tax increases that Congress added to the 2017 law to partially offset the cost of the corporate rate cut. Reversing these increases without a corresponding increase in the corporate rate would amount to hundreds of billions in additional tax cuts for corporations.^[30]

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8. Do House Republicans reject additional unwise tax cuts?

The House-passed budget resolution calls for $4.5 trillion of tax cuts over fiscal years 2025-2034, which leaves room for $1.2 trillion in additional tax cuts on top of extending the 2017 individual and estate tax cuts. In addition to the likely business tax cuts discussed above, House Republicans may include some costly new tax cuts that disproportionately benefit high-income households.

Notably, Republicans appear poised to weaken the 2017 law’s $10,000 cap on deductions for state and local taxes (SALT). The SALT cap has received outsized public attention, potentially creating the mistaken impression that the affected filers fared relatively poorly under the 2017 law. Even with the SALT cap, the 2017 law delivered the biggest average tax cut, measured as a share of pre-tax income, to households with incomes in the 95-99th percentiles, a group making roughly between $400,000 and $1 million.

These households would also be the biggest winners from most proposals to expand the SALT cap. For example, increasing the cap to $25,000 for married couples would mean an additional $5,550 to high-income couples, or 12 times as much as households with incomes in the bottom 60 percent would receive from extending the entire 2017 law.

The Ways and Means bill also will likely include other tax cuts President Trump proposed during the campaign, such as exempting Social Security income and tips from income taxes. But these policies would do little for households with low incomes and would add significantly to the cost.

For example, repealing the taxation of Social Security benefits would weaken the financing of Social Security and Medicare and make the Social Security system less progressive.^[31] About half of Social Security beneficiaries already pay no tax on their benefits, primarily because their incomes fall below the specified thresholds. Similar proposals, like retaining the tax on benefits but fully offsetting it with an equal income tax credit, would still dig a large and growing hole in the federal budget (costing well over $1 trillion over ten years) without benefiting low-income seniors.^[32]

The President’s proposal to eliminate taxes on tips would help only a small minority of low-paid workers and barely add to the tax cuts going to families with low and moderate incomes.^[33] It also could open up significant tax gaming opportunities as people with high incomes seek to reclassify their income as tips to avoid tax.

Strengthening the Fiscal Outlook to Meet Existing Commitments and Make High-Value Investments

9. Do House Republicans offset the cost of their tax cuts with sound revenue proposals?

Despite rising needs due to the aging of the baby boom generation and underinvestment in public services and the economy, policymakers have enacted tax cuts in the past two decades that have eroded the revenue base.^[34] This has undermined investments and driven up deficits and debt, increasing future risks to the economy.

Instead of raising revenues, many congressional Republicans have used the increase in debt to push for deep cuts in Medicaid and SNAP even as they seek to extend costly tax cuts and add a trillion dollars or more in new cuts on top.

Republicans could cut the cost of extending the 2017 law by more than half, from $4.2 trillion to $1.8 trillion over 2026-2035, by reversing the tax cuts for anyone with income above $400,000.^[35] Moreover, sound tax policies are readily available for Republicans to pay for the tax cuts they want to extend.^[36]

10. Do House Republicans avoid gimmicks and timing shifts that prior tax bills (such as the 2017 law) have used to hide their true cost?

The 2017 law relied on budget tricks such as making many tax cuts temporary or having tax increases phase in later to make its tax cuts appear less costly, which allowed Republican lawmakers to squeeze in a larger corporate rate cut. They may do so again this year, despite authorizing an even more costly bill than the original 2017 law.

For example, House Republicans are reportedly considering limiting any new tax cuts — that is, those other than extensions of the 2017 law, such as eliminating tax on tips — to just four years.^[37] This would lower the bill’s official cost relative to permanent new tax cuts but would mask the true cost of those provisions, because lawmakers could be expected to push for their extension later, likely without offsetting the cost. An even more egregious gimmick would be for House Republicans to copy Senate Republicans in adopting a “current policy” baseline, where the expiring tax cuts are simply assumed to continue after 2025 and thus that they would have zero cost.^[38]