Congress Unveils Sweeping Tax Reform Bill: Key Provisions, TCJA Comparisons, and Legislative Outlook

On May 9, 2025, the House Ways and Means Committee released a comprehensive draft of new tax legislation, informally dubbed the "One, Big, Beautiful Bill." This 389-page proposal aims to extend and expand upon the Tax Cuts and Jobs Act (TCJA) of 2017, introducing significant changes to the U.S. tax code. While it retains many elements of the TCJA, the draft also introduces new provisions that could have far-reaching implications for taxpayers, businesses, and the federal budget.

Key Provisions of the Draft Legislation

1. Extension of TCJA Tax Cuts

The draft bill seeks to make permanent several tax cuts enacted under the TCJA, which are currently set to expire at the end of 2025. This includes maintaining the reduced individual income tax rates and the increased standard deduction.

2. Adjustments to the State and Local Tax (SALT) Deduction

The proposal increases the SALT deduction cap from $10,000 to $30,000 for couples earning $400,000 or less. This change aims to provide relief to taxpayers in high-tax states, though some lawmakers argue it doesn't go far enough. 

3. Elimination of Green Energy Tax Credits

In a significant shift from previous policy, the bill proposes phasing out key green energy incentives, including tax credits for electric vehicle purchases and renewable energy investments. These measures aim to dismantle many of the climate initiatives implemented under the Inflation Reduction Act. 

4. Introduction of New Tax Benefits

The draft introduces several new tax benefits, such as deductions for tipped wages and overtime pay and enhanced inflation protections. These provisions are designed to provide targeted relief to specific groups of taxpayers. 

5. Omission of Proposed Tax Increase on High Earners

Despite earlier suggestions, the bill does not include a proposed 39.6% income tax rate for multimillionaires. The top tax rate remains at 37%, a decision that has drawn criticism from those who argue it favors the wealthy and fails to address revenue concerns. 

Comparison with the Tax Cuts and Jobs Act (TCJA)

While the new draft legislation builds upon the foundation laid by the TCJA, there are notable differences:

• Scope of Tax Cuts: The TCJA primarily focused on broad tax cuts for individuals and corporations. The new bill extends these cuts but also introduces targeted benefits for specific groups, such as tipped workers and families with young children.

• Energy Policy: The TCJA included some incentives for renewable energy. In contrast, the new draft seeks to eliminate many green energy tax credits, signaling a shift in energy policy priorities.

• SALT Deduction: The TCJA capped the SALT deduction at $10,000. The new proposal raises this cap to $30,000 for certain income levels, addressing concerns from taxpayers in high-tax states.

  
  

Legislative Outlook and Next Steps

The draft bill is set to undergo review by the House Ways and Means Committee, with debates and potential amendments expected in the coming weeks. Given the narrow Republican majority in the House and the likelihood of opposition in the Senate, the bill's passage is uncertain. Key points of contention include the elimination of green energy tax credits and the absence of increased taxes on high earners.

If the bill advances through the House, it will face further scrutiny in the Senate, where bipartisan support will be crucial for its enactment. Stakeholders across various sectors are closely monitoring the legislative process, as the bill's provisions could have significant implications for tax planning and economic policy.

Conclusion

The newly released draft tax legislation represents a significant effort to reshape the U.S. tax code, building upon and diverging from the TCJA in key areas. As Congress deliberates on the bill, taxpayers and professionals should stay informed about potential changes that could impact financial planning and compliance strategies.

For more detailed information and updates on the legislative process, visit the House Ways and Means Committee's official page.