Tax Tracker | Your Guide to this Week’s Tax Markup
Links for the 2025 tax debate.
On Friday, the Ways and Means Committee released a “pre-mark” version of the tax title of the Republicans’ One Big Beautiful Bill (#OneBigBALANCEDBill). The pre-mark has some interesting details, but left unaddressed almost all of the big unknowns. The committee intends to release an updated version of the bill text on Monday before their markup the following day, Tuesday, May 13, at 2:00 p.m.
This Tax Tracker starts with a brief summary of the pre-mark, then describes four categories of big unknowns that will hopefully be addressed this week.
The final details will matter. A bill that makes permanent reforms, expands investment expensing, and lowers rates can build on the success of the TCJA and help offset some of the economic harm caused by President Trump’s tariffs. But if it raises top rates and piles on new special interest carveouts, it risks a messier code, slower growth, and higher deficits.
What’s in the Pre-Mark?
The bill text makes many of the TCJA changes permanent, adds temporary increases to the standard deduction and child tax credit (CTC), and expands the pass-through deduction.
The full text is here, the summary from the Joint Committee on Taxation is here, revenue tables here, and an overview of the TCJA (if you need a refresher) is here (scroll to the end for a provision-by-provision summary).
Here’s what the pre-mark does:
The TCJA rates and bracket structure are permanent. Adds an additional year of inflation adjustment in 2026 for all but the 37 percent bracket, effectively taxing more of Americans’ income at lower rates.
The larger standard deduction is permanent. Adds a temporary $2,000 ($1,000 single) increase in the standard deduction, starting in 2025, through 2028. Permanently repeals the personal and dependent exemptions.
The $2,000 child tax credit is permanent. Temporarily increases the credit by $500, to $2,500 beginning in 2025, through 2028; after which point the base credit is indexed for inflation. Requires a Social Security number for the child and both parents, if filing jointly.
Makes passthrough business deduction (Section 199A) permanent, increases it from 20 percent to 22 percent, and expands access by phasing in guardrails more slowly.
Permanently raises estate tax exemption to $15 million per person (up from $14 million in 2025).
Makes permanent TCJA alternative minimum tax (AMT), $750,000 mortgage interest deduction, and other smaller itemized deduction changes. Permanently repeals Pease limit on itemized deductions. The text does not mention the state and local tax deduction (SALT).
Permanent international tax rates at 2025 levels for FDII, GILTI, and BEAT (here’s my international tax primer).
Limits Medicare eligibility to US citizens, green card holders, and other specified categories.
Tightens definitions for the $800 de minimis exemption for low-dollar trade.
Permanently higher ABLE account limits and access to saver's credit, ends employer bicycle commuting benefit, and permanent exclusion of student loan debt discharged due to death or permanent disability.
So, What’s Missing?
The pre-mark settles a few pivotal questions, but it leaves most of the hardest decisions for future drafts. I’m tracking four key categories of unresolved issues:
Pro-growth provisions
New tax preferences
Base-broadening and subsidy elimination
Anti-growth tax increases
1. Pro-growth provisions
Keeping the top marginal income tax rate at 37 percent and modestly increasing the estate tax exemption are positive steps for growth. But the biggest drivers of long-term growth are policies that lower the effective tax rate on capital, and they remain TBD. The biggest questions are about scope, permanence, and retroactivity. Permanent reforms are the most pro-growth, creating predictable incentives for long-term investment. Retroactive tax cuts don’t affect future behavior and thus squander scarce fiscal resources. Some of the biggest open questions include:
Expensing: Will the TCJA’s 100 percent bonus depreciation for equipment and machinery be restored?
R&D amortization: Will businesses once again be allowed to immediately deduct R&D expenses rather than amortize them over five years?
Interest limits: Will the interest deduction limit revert to 30 percent of interest, taxes, depreciation, and amortization (EBITDA) instead of EBIT, restoring a broader base for deductibility?
Structures: Will new provisions allow accelerated cost recovery of structures, either broadly or targeted to manufacturing or other sectors? The TCJA did not reform the treatment of structures. Adding structures expensing is the single most pro-growth addition Congress could make to the TCJA.
Corporate rate: Will the 21 percent corporate income tax rate be cut? The larger 199A deduction might suggest a small rate reduction.
2. New tax preferences
President Trump has proposed a range of new and expanded tax preferences. These policies may be politically appealing, but they tend to carry large fiscal costs, add complexity, open new avenues for tax avoidance, and deliver little in the way of long-term growth.
One of the most notable omissions in the pre-mark text is the SALT cap. Lawmakers are widely expected to raise the cap to win over members who continue to push for expansion. The fiscal impact will depend on the new threshold. A $30,000 cap for joint filers (up from $10,000) would cost roughly $450 billion over a decade. Read more about the SALT cap here.
Several Trump campaign proposals would exclude certain types of income from taxation, including tips, overtime, and Social Security. Rewriting Social Security tax treatment via reconciliation is difficult, so lawmakers may opt for indirect relief, such as expanding the additional standard deduction for seniors. These carveouts can be made less costly with tight eligibility rules, but that comes with added complexity. Read more here.
Trump has also called for lower tax rates on domestic production, potentially reviving the failed Section 199 domestic production activities deduction, which was repealed in the TCJA. He’s also suggested reviving the personal deduction for interest paid on domestically produced car loans.
The final bill would be best if none of these expensive new subsidies are ultimately included.
3. Base-broadening and subsidy elimination
Many of the most costly and distortionary provisions remain untouched in the pre-mark draft, suggesting that addressing politically sensitive subsidies is left to future drafts or avoided entirely. Without including these and other offsets, the bill’s permanent revenue reduction will be unsustainable (unless spending is cut further than expected).
The most glaring absence is any reform or repeal of the Inflation Reduction Act’s (IRA) energy tax credits. The IRA turned our tax code into a multi-trillion-dollar energy entitlement program, creating subsidies without caps, sunsets, or accountability. Repealing the IRA is the only responsible path forward. Read more here.
There’s also no mention of adding limits to corporate SALT (C-SALT) deductions, ACA subsidy recapture rules, limits on tax-exempt bonds (even for sports stadiums), the employee retention tax credit repeal, a higher endowment tax, or new limits to fringe benefits. These are just a handful of the available options, accounting for trillions of dollars of tax expenditures that could be used to offset the tax cuts.
4. Anti-growth tax increases
Recent reporting suggests the reconciliation bill may include several tax hikes. While the overall package will be a net tax cut, some contemplated proposals raise effective tax burdens on the economy’s most sensitive actors: investors, entrepreneurs, and high earners. Other worthwhile reforms, such as C-SALT caps and changes to carried interest, can also increase taxes on capital and must be paired with other pro-growth reforms. Examples of anti-growth tax increases include:
Top tax rates: Trump has floated raising the top rate to 39.6% with a higher income threshold. According to the Tax Foundation, reverting to the pre-TCJA top rate and bracket would offset about 75 percent of the growth gains from making other TCJA individual provisions permanent.
Executive compensation limits: Expanding limits on the deductibility of executive pay amounts to a backdoor 21 percent surtax (the corporate tax rate) on wages. These limits distort incentives and push firms toward less transparent forms of compensation, like stock options.
Stock buyback tax: The current 1 percent excise tax on stock buybacks, created in 2022, raises the tax burden on new investment and favors debt financing. Increasing the rate would further bias investment decisions and deepen tax disparities across business types.
Final Thoughts
With markup scheduled in just 48 hours, the breadth of uncertainty surrounding many of the reconciliation package’s most critical elements is striking. The details will matter. Well-designed offsets and permanent investment incentives are essential to keeping the bill both fiscally responsible and pro-growth. With costly and unpredictable tariffs looming, there's no room for punitive tax hikes or a new wave of special interest carveouts.
Any final assessment will also need to account for the non-tax reforms under discussion: changes to Medicaid, education subsidies, food and farm programs, and energy policy, among others. Many of these also remain in flux, but they have significant policy and fiscal implications of their own.
Congress has the opportunity to pass a serious, growth-focused reconciliation package that keeps taxes from rising and does not worsen the US fiscal trajectory.