House Budget Committee Passes "No Tax" Bill: Key Details
Overview
On May 18, 2025, the House Budget Committee narrowly approved a sweeping Republican tax bill, advancing President Donald Trump’s major tax reform package toward a possible full House vote later in the week. The legislation, often referred to as the “One Big, Beautiful Bill,” includes several high-profile tax cuts and reforms, with a central promise of “No Tax on Tips”.
Key Provisions of the Bill
- Permanent Extension of 2017 Tax Cuts: The bill makes permanent the individual and business tax reductions enacted in the 2017 Tax Cuts and Jobs Act, which were set to expire in 2025.
- No Tax on Tips: Fulfilling a Trump campaign pledge, the bill eliminates federal income tax on tips, directly benefiting workers in tipped industries such as restaurants and hospitality.
- No Tax on Overtime Pay: Overtime earnings would be exempt from federal income tax, though relatively few workers regularly earn overtime pay.
- Deduction for Car Loan Interest: The bill introduces a temporary deduction for interest on qualified passenger vehicle loans, primarily benefiting lower-income car buyers.
- Changes to SALT Deduction: The cap on state and local tax (SALT) deductions would be raised, especially for filers earning under $400,000, though the final threshold remains under negotiation.
- Cuts to Green Energy Incentives: The bill proposes rolling back or phasing out many tax credits for electric vehicles and renewable energy, with further reductions pushed by some conservatives.
Political Context and Vote Outcome
- The bill passed the House Budget Committee by a narrow 17-16 margin, with all Democrats opposed and four Republican hardliners voting “present” after negotiations with party leadership.
- Internal GOP disputes centered on spending cuts, particularly to Medicaid and green energy programs, nearly derailed the bill earlier in the week.
- The bill is expected to face further debate and possible amendments before a full House vote, and substantial changes may occur in the Senate.
Projected Impact
- Distributional Effects: Nonpartisan analyses indicate that high-income earners would see the largest tax savings, with the top 20% of households receiving over two-thirds of the benefits. The average tax cut in 2026 would be about $2,800, but most of the relief would go to wealthier taxpayers.
- Deficit and Debt: The bill’s tax cuts could increase the national debt by $3 trillion to $5 trillion over the next decade, according to estimates from the Committee for a Responsible Federal Budget and the Joint Committee on Taxation.
- Economic Risks: Analysts warn that the resulting higher debt could slow long-term economic growth and ultimately leave low- and even high-income earners worse off due to the negative effects of ballooning deficits.
Summary Table: Major Provisions and Effects
| Provision | Who Benefits | Estimated Fiscal Impact |
|---|---|---|
| No tax on tips | Tipped workers | ~$1,700 avg. tax cut for eligible workers |
| No tax on overtime pay | Hourly workers w/ overtime | Limited (few regularly earn overtime) |
| Car loan interest deduction | Car buyers (esp. lower-income) | Modest, applies to U.S.-made vehicles |
| Permanent 2017 tax cuts | Primarily high-income households | $3–5 trillion increase in debt over 10 years |
| SALT deduction increase | Taxpayers in high-tax states | Under negotiation |
| Cuts to green energy credits | Federal budget (savings) | Billions in reduced spending |
Conclusion
The House Budget Committee’s passage of the “No Tax” bill marks a significant step for the GOP’s tax agenda, especially the promise to eliminate taxes on tips and overtime. However, the bill’s benefits are expected to accrue mainly to higher-income households, while its substantial cost could worsen the federal deficit and national debt over the next decade. The legislation now moves to the full House for further consideration and potential revision.