Click here for our analysis of the bill as passed by the House of Representatives.
Key Points
Tax provisions approved by the Senate Finance Committee would extend and expand major components of the 2017 Tax Cuts and Jobs Act, which we estimate will increase primary deficits by $4,321 billion ($4.3 trillion) over 10 years. Other Committees increase primary deficits by another $287 billion. These changes would be partly offset by spending cuts of $1,397 billion, for a total conventional cost of $3,211 billion.
The bill would increase debt by 7.7 percent in 10 years, and decrease GDP by 0.3 percent in 10 years. The average wage falls by 0.4 percent in 10 years. Primary deficits increase by more (to $3,631 billion) in the budget window when accounting for these economic dynamics, due to microeconomic responses and compositional effects described in the brief. After 30 years, GDP falls by 4.6 percent and wages fall by 3.4 percent, due to capital shallowing relative to current law.
On a conventional basis, households in the first income quintile lose about $885 in 2030, reflecting net reductions in taxes and transfers, including cuts to Medicaid and SNAP. The top 10% of the income distribution receives about 80 percent of the total value of the legislation. (Under current law, the top 10 percent of the income distribution pays about 70 percent of all federal taxes). On a dynamic lifetime basis, lower-income households and some in the middle class are worse off, as are all future generations.
Updated on 7/2/2025
Senate-Passed Reconciliation Bill Budget, Economic, and Distributional Effects
On July 1st, the Senate voted to approve its FY 2025 reconciliation bill. This analysis scores the legislative text as passed against a current law baseline. This differs from official cost estimates for the bill, which score some of the proposed changes relative to current law and others relative to current policy. Under a current policy baseline, extending provisions that are set to expire scores as having zero cost. In our analysis against a current law baseline, the cost of such extensions is fully counted.
Table 1 summarizes the deficit effects of the legislation passed by the Senate on July 1. PWBM estimates that, as written, the bill would increase primary deficits by $3,211 billion from 2025 to 2034.
| Committee | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | Total, 2025-2034 budget window |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Finance | 133 | 387 | 546 | 509 | 407 | 310 | 262 | 253 | 322 | 345 | 3,474 |
| Armed Services | 2 | 42 | 45 | 25 | 17 | 9 | 5 | 3 | 1 | 1 | 150 |
| Homeland Security and Governmental Affairs | * | 10 | 18 | 25 | 25 | 20 | 15 | 9 | 4 | 2 | 129 |
| Judiciary | * | 2 | 3 | 6 | 7 | 5 | * | -2 | -6 | -6 | 9 |
| Banking, Housing, and Urban Affairs | * | * | * | * | * | -1 | * | * | * | * | -2 |
| Environment and Public Works | -1 | -1 | -1 | -1 | -1 | * | * | * | * | * | -3 |
| Energy and Natural Resources | * | * | -2 | -3 | -3 | -4 | -4 | -4 | -4 | -4 | -27 |
| Commerce, Science, and Transportation | * | 3 | 5 | 5 | 2 | -7 | -16 | -19 | -13 | -4 | -44 |
| Agricultrue, Nutrition, and Forestry | * | -8 | -10 | 0 | 0 | -14 | -13 | -15 | -15 | -15 | -90 |
| Health, Education, Labor, and Pensions | -177 | -21 | -19 | -19 | -22 | -25 | -25 | -26 | -26 | -27 | -387 |
| Interactions Among Titles | 0 | 0 | * | * | * | 1 | 1 | 1 | * | 0 | 3 |
| Total change in the primary deficit | -43 | 414 | 584 | 547 | 434 | 295 | 225 | 201 | 264 | 290 | 3,211 |
* = less than $500 million.
Note: Estimates for the Agriculture, Nutrition and Forestry; Finance; and Health, Education, Labor, and Pensions committees are by PWBM. Estimates for all other committees and for interactions between titles are from the Congressional Budget Office.
Sources: Penn Wharton Budget Model, Congressional Budget Office, Joint Committee on Taxation.
PWBM estimates that the Senate Finance Committee’s tax proposals would reduce revenues by $4.3 trillion over the budget window.1 Increases in spending under the Armed Services, Judiciary, and Homeland Security and Governmental Affairs Committees’ jurisdictions would add another $287 billion to primary deficits. The proposals of all other committees, including the non-tax proposals of the Finance Committee, amount to net spending cuts or revenue increases. However, those savings amount to only $1.4 trillion in total, offsetting less than one third of the $4.6 trillion increase in deficits from tax cuts and spending increases.
Table 2 reports the revenue effects of the reconciliation legislation proposed by the Senate Finance Committee, which would extend and expand major components of the TCJA, create several new tax benefits for specific forms of income, and eliminate or substantially limit a wide range of energy-related tax credits.
| Provision | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | Total, 2025-2034 budget window |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Extend TCJA individual & estate tax provisions | * | -165 | -366 | -380 | -383 | -385 | -399 | -413 | -431 | -447 | -3,369 |
| Restore TCJA business and international tax provisions | -69 | -120 | -133 | -118 | -97 | -87 | -89 | -86 | -88 | -91 | -977 |
| Expand TCJA individual & estate tax provisions | -4 | -32 | -33 | -35 | -40 | -41 | -43 | -48 | -50 | -56 | -381 |
| Expand and modify TCJA business and international tax provisions | -11 | * | 5 | 6 | 6 | 15 | 19 | 20 | 21 | 22 | 103 |
| New individual tax provisions | -44 | -90 | -95 | -99 | -62 | -29 | -1 | -1 | -1 | * | -420 |
| Repeal or modify energy and clean vehicle tax credits | 0 | 22 | 48 | 72 | 93 | 108 | 118 | 131 | 60 | 47 | 699 |
| Other tax provisions (CBO and JCT) | -1 | -10 | -9 | -6 | -2 | 6 | 8 | 9 | 15 | 13 | 24 |
| Total change in revenues | -129 | -396 | -581 | -560 | -484 | -412 | -386 | -389 | -473 | -511 | -4,321 |
* = less than $500 million.
Notes: Provisions in the "Other tax provisions" category were not modeled by PWBM; estimates are from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT).
Revenue effects include changes in outlays associated with tax changes.
Source: Penn Wharton Budget Model, Congressional Budget Office.
Below, we summarize the major provisions and new tax proposals from the Senate Finance Committee. Appendix Table 1 (at the end of this report) presents detailed revenue estimates for these proposals.
Extend TCJA individual and estate tax provisions: Extending the TCJA would retain the current individual income tax rates, tax brackets, standard deduction, limits on itemized deductions, tax credits, estate tax exemption, and other tax parameters in place since TCJA went into effect. See our previous analysis of the House reconciliation proposals and TCJA extension for additional details. For provisions of the TCJA that are expanded or altered under the Senate Finance Committee proposal (such as the child tax credit and the cap on state and local tax (SALT) deductions), we consider those expansions separately and estimate their effects relative to extension of the original version in the TCJA.
Restore TCJA business and international tax provisions: The bill would permanently restore the cost recovery rules initially in place under the TCJA, including the special bonus depreciation deduction for qualified investment, the immediate deductibility of research and experimentation costs, and the more relaxed net interest limitation based on income before interest, taxes, depreciation, and amortization. It would also permanently maintain the section 250 deduction and effective statutory tax rates on global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) close to their current levels (they are set to rise in 2026 under current law) and make other changes to the taxation of multinational businesses.
Expand TCJA individual and estate tax provisions:
Provide an additional year of inflation adjustment for some ordinary tax bracket thresholds: For the bottom two ordinary rate bracket thresholds (i.e. the 12 percent and 22 percent bracket), the bill provides an additional year of inflation adjustment, setting the base year for calculating the adjusted value to 2016, rather than 2017. This proposal takes effect in 2026 and produces bracket thresholds that are higher than they otherwise would be, relative to a simple extension of the TCJA.
Enhanced standard deduction: The bill permanently enhances the standard deduction, above and beyond the increase to the standard deduction in the TCJA, beginning in 2025. Under the bill, in 2025 the new standard deduction would be $15,750 for single filers ($750 greater than under the TCJA), $31,500 for married filers ($1,500 greater than under the TCJA), and $23,625 for heads of household ($1,125 greater than under the TCJA). The enhanced standard deduction is adjusted for inflation after 2025.
Enhanced child tax credit: The bill permanently enhances the value of the nonrefundable portion of the child tax credit above and beyond its TCJA value from a nominal $2,000 to a nominal $2,200 per child, beginning in 2026. This value is adjusted for inflation thereafter.
Enhanced deduction for qualified business income: The bill provides a permanent minimum deduction under section 199A of $400 beginning in tax year 2026 for taxpayers who have at least $1,000 in qualified business income. It also modifies the rules dictating the limitation of qualified business income based on income and business type/characteristics, relative to a simple TCJA extension.
Enhanced estate tax exemption: The bill permanently increases the estate tax exemption to $15 million (up from $10 million in 2017 dollars under a simple TCJA extension), beginning in tax year 2026. This amount is indexed for inflation thereafter.
Alternative Minimum Tax Inflation Adjustment: The 2017 TCJA set higher exemptions and exemption phase out thresholds for the Alternative Minium Tax (AMT).2 It indexed these thresholds for inflation, with a base year of 2017. This bill, along with extending the TCJA AMT parameters, resets the phase out threshold value in 2026, effectively “resetting” the inflation adjustments that occurred since the TCJA passed, and inflation adjusts them using a 2025 base year thereafter. It also increases the exemption phase out rate from 25 percent to 50 percent. This lowers the phase out threshold and phases out the exemption more quickly, therefore subjecting more income to the AMT, relative to a simple TCJA extension.
Expand and modify TCJA business and international tax provisions: The bill would increase the limits on immediate expensing of investment under section 179 and temporarily expand the special bonus depreciation deduction to structures used in production activities through 2028. It also makes several changes to the TCJA’s GILTI regime for taxing foreign income, including eliminating the exclusion of a deemed return on tangible capital, allowing greater creditability of foreign taxes, and changing rules for expense allocation.
New individual tax provisions:
Limit itemized deductions: The bill institutes a new permanent limit on itemized deductions beginning in tax year 2026. This limitation applies to filers with taxable income that exceeds the 37 percent ordinary rate threshold for their filing status and reduces allowable itemized deductions by 2/37 of the amount by which taxable income exceeds this threshold (or the total amount of itemized deductions, whichever is smaller).
No tax on tips: The bill provides a temporary deduction for qualified tip income, available to all filers regardless of itemizing status, beginning in tax year 2025. This deduction is capped at a $25,000. The bill sets general guidelines for forthcoming regulations governing what constitutes qualified tip income. These guidelines are intended to limit the occupations for which tipped income will qualify for the deduction. The deduction phases out for individuals with income greater than $150,000 ($300,000 for married taxpayers filing jointly). This deduction ends after 2028.
No tax on overtime: The bill provides a temporary deduction for the bonus amount of eligible overtime pay, available to all filers regardless of itemizing status, beginning in tax year 2025. The deduction only applies to overtime covered by the Fair Labor Standards Act, and is capped at $12,500 ($25,000 in the case of a joint return). The deduction phases out for individuals with income greater than $150,000 ($300,000 for married taxpayers filing jointly). This deduction ends after 2028.
Additional deduction for seniors: The bill provides a new temporary bonus deduction for all individuals who have attained the age of 65. This deduction is $6,000 per individual and phases out at a rate of 6 percent of AGI over $150,000 for married taxpayers filing jointly, or $75,000 for all other filers. This deduction is available to all qualifying taxpayers beginning in tax year 2025, and it expires after 2028.
No tax on auto loan interest: The bill provides a temporary deduction for qualified passenger vehicle loan interest beginning in 2025. The bill outlines several restrictions on what constitutes qualified auto loan interest. It also limits the total deductible amount to $10,000 per year, or 20 percent of the taxpayer’s AGI more than $100,000 ($200,000 for married taxpayers filing jointly), whichever is lower. This deduction expires after 2028.
Enhanced child and dependent care tax credit: Under current law, taxpayers may claim a tax credit for certain employment-related expenses for child and dependent care, up to a maximum of $3,000 ($6,000 for filers with 2 or more qualifying dependents). The bill permanently increases the deductible share of expenses from 35% to 50% (still subject to the overall dollar cap) and modifies the phaseout formula beginning in 2026.
Charitable deduction for non-itemizers: The bill provides a permanent deduction for charitable contributions available to non-itemizers beginning in 2026. This deduction is limited to $2,000 for married taxpayers filing jointly, and $1,000 for all other filers.
Floor on charitable deduction for itemizers: This bill imposes a permanent 0.5 percent floor on itemized charitable deductions beginning in 2026. For taxpayers who itemize and take the charitable deduction, the qualifying contribution amount is reduced by 0.5 percent of their income for the year. Those with total contributions less than 0.5 percent of their annual income would be ineligible for the deduction.
Temporarily increase the SALT deduction cap to $40,000: In the 2017 TCJA, the previously unlimited individual state and local tax (SALT) deduction was capped at $10,000, meaning itemizers could only claim a maximum of $10,000 of their state and local tax liability as a deduction. This bill provides a temporary new SALT deduction cap of $40,000, beginning in 2025. This cap phases out at a rate of 30 percent of adjusted gross income over $500,000, to a minimum cap of $10,000. Starting in 2026, the applicable cap and phase-out thresholds grow by 1 percent each year through 2029. In 2030, the cap reverts permanently to a maximum of $10,000.
Repeal or modify energy and clean vehicle tax credits: The bill eliminates or substantially limits several tax credits designed to encourage investment and production of clean energy, alternative fuels, and electric vehicles. A number of these credits created or expanded under the Inflation Reduction Act of 2021. They include credits for individuals (such as clean vehicle and residential efficiency credits) and businesses (such as energy production and manufacturing credits).
Table 1 also shows the deficit reduction achieved by committees instructed to reduce spending or increase non-tax revenues. Below, we summarize the major spending reductions proposed by various committees.
Changes to Medicaid: The Finance Committee’s provisions include changes to major federal health programs. The legislation would cut Medicaid spending by imposing work requirements, restricting state-level taxes on healthcare providers that draw federal matching funds, increasing the frequency of eligibility checks, changing Medicaid eligibility requirements based on immigration status, and phasing down state-directed payments to providers under managed care organizations to be in line with Medicare rates. It would also create a rural hospital fund to partially offset those cuts. Those and other changes to Medicaid would reduce the deficit by $884 billion over the budget window.
Changes to the Supplemental Nutrition Assistance Program (SNAP): The Agriculture, Nutrition, and Forestry Committee’s proposal would reduce spending on SNAP by $156 billion over ten years. The bill would shift a significant portion of SNAP benefit costs to states with a new cost-sharing formula linked to payment error rates. It would also create additional work documentation requirements, limit the growth of the Thrifty Food Plan, shift administrative costs to states, and make other changes to reduce federal SNAP costs.
Changes to student loans: The Health, Education, Labor, and Pensions Committee’s proposal would eliminate subsidized and income-driven loan repayment plans, impose new overall limitations on student borrowing, and tighten Pell Grant eligibility. Altogether, the Education and Workforce Committee’s proposal would reduce spending by $387 billion over the budget window. Under federal budget accounting rules, the lifetime subsidy costs of student loans are measured on an accrual basis and recorded up front. As a result, almost $200 billion of the Committee’s total savings are recorded in the budget immediately in Fiscal Year 2025.
Table 3 reports the total conventional-basis cost of legislation of $3,211 billion over 10 years. Including dynamic effects does not reduce the legislative costs despite small, positive increases in GDP over the first decade, reported in Table 4 and discussed below. The actual savings from economic growth do not appear until 2033 and 2034 and are not enough to overcome higher costs in earlier years in the 10-year budget window. After 2033, the dynamic costs fall relative to conventional, a difference which persists until 2054.
| 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | Total, 2025-2034 budget window | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Conventional | -43 | 414 | 584 | 547 | 434 | 295 | 225 | 201 | 264 | 290 | 3,211 |
| With Dynamic Effects | -48 | 423 | 610 | 588 | 486 | 355 | 286 | 263 | 322 | 345 | 3,631 |
Source: Penn Wharton Budget Model
Before 2033, two primary factors increase the dynamic costs relative to conventional:
First, some households that would otherwise have lost Medicaid without dynamics re-acquire access with dynamics by reducing their hours worked.
Second, despite increasing the number of hours worked in response to the legislation (Table 4), firm-level total wage bills are often flat or negative due to compositional effects. Specifically, lower-wage workers increase their hours worked, especially due to a reduction in the social safety net spending programs. However, higher-income households reduce their hours worked, as income effects slightly dominate substitution effects after reductions in marginal tax rates. While total productivity-weighted hours increase, lower-income households pay taxes at a lower marginal tax rate than higher-income households.
PWBM’s dynamic model --- an overlapping-generations (OLG) lifecycle model with uninsurable idiosyncratic risks --- allows us to capture these two effects in detail. Without this framework, the positive response to labor and savings from an increase in uninsurable risk could not be properly incorporated against the negative effects of more government debt. Moreover, the OLG model captures the microeconomic effects associated with Medicaid enrollment and the tax compositional effects noted above, which are important for explaining why 10-year costs with positive dynamics need not be smaller than conventional costs.
Table 4 reports the economic effects of the legislation over the next 30 years. By 2034, Gross Domestic Product (GDP) is projected to be 0.3 percent lower than under current law, while the capital stock will be 0.6 percent lower, and federal debt will increase by 7.7 percent. Work hours are expected to rise by 0.6 percent, even as wages fall by 0.4 percent. Despite higher debt and a lower capital stock, the increase in labor supply reflects that households are less protected from health and income shocks due to cuts to Medicaid and SNAP. As a result, they work longer hours and increase precautionary savings.
| 2034 | 2039 | 2044 | 2049 | 2054 | |
|---|---|---|---|---|---|
| Gross domestic Product | -0.3 | -0.6 | -1.4 | -2.6 | -4.6 |
| Capital stock | -0.6 | -1.1 | -2.4 | -4.7 | -8.3 |
| Hours worked | 0.6 | 0.4 | 0.0 | -0.5 | -1.1 |
| Average wage | -0.4 | -0.6 | -1.1 | -1.9 | -3.4 |
| Consumption | 1.0 | 1.0 | 0.8 | 0.6 | 0.2 |
| Debt held by the public | 7.7 | 9.8 | 12.0 | 14.5 | 17.5 |
Source: Penn Wharton Budget Model
Current law, even before the policy change, is not sustainable. Currently, capital markets have not unraveled, although stress signs are showing. So, financial markets currently hold some belief in a future resolution. Out of consistency with our practice during the previous presidential administration, Table 4, therefore, includes the effect of a future, efficient, broad-based value-added tax (VAT) that avoids financial collapse. The newest version of our model incorporates some probability of future financial market contraction, beyond standard crowding out, where foreign take-up of new debt (the most elastic source of debt demand) declines somewhat in the transition path based on the amount of debt outstanding. Accordingly, we project that the Senate reconciliation bill will lower GDP growth over the next 30 years, and GDP would be 4.6 percent lower in 2054 than under current law. That decrease in growth is driven by an 8.3 percent smaller capital stock and a decrease in hours worked by 1.1 percent. At the same time, the Senate reconciliation bill increases debt by 17.5 percent over the next 30 years.
Table 5 reports conventional-basis distributional effects by income quintile as the percentage change in income after changes in taxes and government spending. The average household in the lowest quintile – with a household income between $0 and $17,999 – would lose $165 in 2027 under the Senate bill. That figure represents a 1.1 percent loss in group income. As spending cuts deepen over time, lower income households come out worse off. By 2033, households in the lowest quintile would see a loss of $1,300 on average. The typical household in the lowest quintile would experience a total income loss of 6.4 percent, and the group as a whole would see its income drop by 7.4 percent. For households in the second quintile, their losses grow to an average of over $1,500 in 2033, representing a 2.9 percent decrease in total income for the group.
| Income group | 2027 | 2030 | 2033 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Lower cutoff for income group | Average change in after-tax-and-transfer income | Percent change in group after-tax-and-transfer income | Median percent change in after-tax-and-transfer income | Lower cutoff for income group | Average change in after-tax-and-transfer income | Percent change in group after-tax-and-transfer income | Median percent change in after-tax-and-transfer income | Lower cutoff for income group | Average change in after-tax-and-transfer income | Percent change in group after-tax-and-transfer income | Median percent change in after-tax-and-transfer income | |
| First quintile | 0 | -165 | -1.1% | 0.3% | 0 | -885 | -5.4% | -2.9% | 0 | -1,305 | -7.4% | -6.4% |
| Second quintile | 18,000 | 30 | 0.1% | 0.7% | 20,000 | -1,090 | -2.3% | -0.9% | 22,000 | -1,520 | -2.9% | -1.4% |
| Middle quintile | 53,000 | 1,430 | 1.8% | 2.2% | 58,000 | 45 | 0.1% | 0.7% | 63,000 | -65 | -0.1% | 0.7% |
| Fourth quintile | 96,000 | 3,955 | 2.9% | 2.9% | 105,000 | 2,505 | 1.7% | 1.8% | 115,000 | 2,865 | 1.8% | 1.9% |
| 80-90% | 179,000 | 6,690 | 3.1% | 3.1% | 195,000 | 4,625 | 1.9% | 2.1% | 214,000 | 5,005 | 1.9% | 2.1% |
| 90-95% | 272,000 | 9,455 | 2.9% | 2.8% | 296,000 | 6,805 | 1.9% | 1.8% | 324,000 | 7,690 | 2.0% | 1.9% |
| 95-99% | 401,000 | 20,790 | 3.5% | 3.8% | 436,000 | 17,275 | 2.7% | 2.9% | 477,000 | 18,675 | 2.7% | 2.9% |
| 99-99.9% | 1,020,000 | 36,700 | 2.1% | 1.8% | 1,101,000 | 27,195 | 1.5% | 1.3% | 1,205,000 | 29,505 | 1.4% | 1.2% |
| Top 0.1% | 4,451,000 | 301,550 | 2.3% | 2.2% | 4,763,000 | 72,885 | 0.5% | 1.1% | 5,194,000 | 83,095 | 0.5% | 1.1% |
Source: Penn Wharton Budget Model
Much of the gains for the top income groups derive from a boost to corporate profits from restoring the TCJA’s original cost recovery regime and maintaining lower tax rates on multinationals. In the near-term, these changes produce large gains in after-tax profits, which flow primarily to high income households. These gains are partly offset by the elimination of energy production and investment incentives for businesses. Additionally, the SALT cap snaps back to $10,000 in 2030, which disproportionately impacts the top of the income distribution.
Dynamic distributional analysis considers how a policy affects households across the income and age distribution, including the unborn (represented by a negative age index at the time of the reform). It asks how much, on average, households in each (income, age) bucket value the proposed policy change over their entire lifetime, represented as a one-time transfer at the time of the policy change. Dynamic distributional analysis is the standard in academic research, where conventional analysis is rarely used due to several key limitations that dynamic analysis addresses. It is also the natural welfare metric of the OLG lifecycle model with uninsurable risk, which is the paradigm model in economics for modeling the bidirectional equilibrium relationship between microeconomic and macroeconomic responses to a policy change.
Note: "Gross Income" refers to each household's income in the year of the policy change. We categorize households not yet in the labor force (ages 20 and younger) by their gross income in the year they enter the labor force.
Source: Penn Wharton Budget Model
Table 6 reports policy “equivalent variations” for the same cases and versions reported in Table 4. A positive equivalent variation means that the person would be better off under the policy reform; a negative equivalent variation means that the person would be worse off under the policy reform. For example, as shown in Table 6, a household aged 30 in the 20th to 40th percentile of the income distribution loses about $10,900 of value from this policy bundle, as shown by the negative value. Put differently, this household is indifferent between adopting this policy bundle and losing a one-time payment of $10,900 without this policy change. However, a household aged 30 in the top 20th percentile of income gains an equivalent of $53,200. This household would be indifferent between this policy bundle and a one-time payment of $53,200 to avoid adopting this bundle.
Table 6 shows that households most affected by the cuts to Medicaid and SNAP—those in the bottom income quintile—experience the largest losses under this bill, averaging $27,500 in lifetime value for the working-age population. In contrast, working-age households in the top income quintile generally benefit from lower taxes, gaining an average of more than $65,000. Working-age households in the middle of the income distribution are largely unaffected, with an average lifetime gain of less than $500, as they face a chance of needing spending programs that have been reduced, but also benefit from some of the tax cuts. All future generations are projected to experience lifetime losses under the bill, ranging from $5,700 for high-income households to $22,000 for low-income households. The losses for lower-income groups are primarily driven by a reduced social safety net and lower wages associated with a lower capital stock, while losses for top-income groups are entirely the result of lower wages.
This appendix provides detailed revenue estimates for the Senate Finance Committee’s tax proposals.
| Provision | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | Total, 2025-2034 budget window | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Finance | ||||||||||||
| Individual and estate tax provisions | * | -164.7 | -365.7 | -380.3 | -382.5 | -385.2 | -398.9 | -413.4 | -431.1 | -446.7 | -3368.5 | |
| Business and international tax provisions | -68.9 | -120.1 | -132.9 | -117.6 | -96.5 | -87.3 | -88.9 | -86.1 | -87.8 | -90.7 | -976.8 | |
| TCJA expansion and modification | ||||||||||||
| Ordinary tax rate inflation adjustment | * | -5.2 | -6.7 | -7.0 | -7.4 | -7.6 | -8.1 | -8.2 | -8.6 | -8.8 | -67.6 | |
| Expanded standard deduction | -3.6 | -18.5 | -17.7 | -19.0 | -19.3 | -20.1 | -21.5 | -21.7 | -22.3 | -23.7 | -187.4 | |
| Expanded child tax credit | -0.5 | -9.5 | -8.4 | -8.8 | -13.2 | -13.4 | -13.8 | -18.2 | -19.0 | -23.4 | -128.2 | |
| Expanded section 199A deduction | * | -0.3 | -0.6 | -0.6 | -0.6 | -0.7 | -0.7 | -0.7 | -0.7 | -0.8 | -5.7 | |
| Increase in estate tax exemption | * | -0.4 | -1.5 | -1.6 | -1.6 | -1.6 | -1.8 | -1.9 | -1.9 | -2.0 | -14.3 | |
| Inflation adjustment in AMT | * | 1.5 | 2.3 | 2.4 | 2.4 | 2.5 | 2.6 | 2.6 | 2.7 | 2.8 | 21.8 | |
| Modifications to international tax provisions | -3.0 | 10.8 | 16.5 | 17.0 | 17.6 | 18.3 | 19.3 | 19.6 | 20.4 | 21.0 | 157.5 | |
| Other business expansions | -8.1 | -11.0 | -11.3 | -11.4 | -11.2 | -2.8 | 0.1 | 0.3 | 0.5 | 0.8 | -54.0 | |
| New individual tax provisions | ||||||||||||
| Limit itemized deductions | * | 2.4 | 4.4 | 4.6 | 4.7 | 4.9 | 5.2 | 5.3 | 5.6 | 5.8 | 42.9 | |
| No tax on tips | -3.9 | -4.0 | -4.1 | -4.2 | * | * | * | * | * | * | -16.2 | |
| No tax on overtime | -18.4 | -23.4 | -23.9 | -24.1 | -5.2 | * | * | * | * | * | -95.0 | |
| Provide additional deduction for seniors | -14.5 | -26.2 | -26.6 | -27.0 | -11.8 | * | * | * | * | * | -106.1 | |
| No tax on auto loan interest | -0.7 | -6.6 | -8.2 | -10.0 | -10.6 | * | * | * | * | * | -36.1 | |
| CDCTC Expansion | * | -0.1 | -1.9 | -1.9 | -1.8 | -1.8 | -1.7 | -1.6 | -1.6 | -1.4 | -13.8 | |
| Above the line deduction for charitable contributions | * | -2.6 | -10.5 | -10.6 | -11.2 | -11.7 | -12.0 | -12.2 | -12.6 | -12.9 | -96.3 | |
| 0.5% floor for itemized charitable deduction | * | 2.5 | 6.5 | 6.8 | 7.1 | 7.5 | 7.8 | 7.8 | 8.0 | 8.6 | 62.6 | |
| Cap state and local tax deductions at $40,000 | -6.7 | -31.9 | -30.6 | -32.1 | -33.5 | -27.6 | * | * | * | * | -162.4 | |
* = less than $500 million.
Source: Penn Wharton Budget Model
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