House Passes OBBB; Next Stop the Senate

Early in the morning on May 22, the House passed its budget reconciliation bill, the One Big Beautiful Bill Act (OBBB). House Republican leadership was successful in threading the needle to get the bill passed despite divergent and sometimes seemingly irreconcilable differences within the caucus.

Crowe observation

It is unclear what will remain of the House bill after it gets through the Senate.

Republicans are using the reconciliation process to pass a single bill to enact its major legislative agenda items of increasing funding for defense and immigration enforcement, reducing overall federal spending, raising the debt ceiling, and addressing tax issues, including preventing a tax increase due to expiring provisions in the Tax Cuts and Jobs Act of 2017. Reconciliation allows the Senate to pass the bill with a simple majority, but it comes with significant procedural rules that could come into play as the Senate considers the House bill. Additionally, while the Senate majority’s priorities generally align with its House colleagues, there are significant differences that likely will show up as the Senate takes up the bill.

Changes in central parts of the bill allow House passage

Overall, spending and tax were particular sticking points for reaching consensus on the bill in the House. Some changes to the version of the bill that was approved at the committee level and the personal involvement of the president enabled passage of the bill. Much of the Ways and Means Committee-approved tax language remains unchanged. However, the House-passed bill changes some energy tax incentive and international tax provisions. Probably the biggest tax change from the perspective of getting the bill passed through the House is an increase in the cap on the state and local tax deduction (SALT cap). The House-passed bill increases the SALT cap to $40,000 and raises the income level for phasedown of the cap to $500,000.

Looking ahead

With the Memorial Day deadline met, the Senate is poised to take up the House bill. How the bill ultimately takes shape will become clearer over the next weeks and months. Republicans have stated that they hope to have a final OBBB on the president’s desk by July 4, meaning that this will be a busy time for tax policy watchers.