Ways & Means Draft Could Add $5 Trillion to Deficits

Update (5/10/2025): This piece was published prior to the Joint Committee on Taxation's revenue estimate, which totals $4.9 trillion for the bill as drafted. The table below has been updated to reflect this estimate.

The House Ways & Means Committee released a preliminary draft of its tax legislation last night. The draft appears to include only some of the provisions under consideration by the Ways & Means Committee and will reportedly be replaced with a with an “amendment in the nature of a substitute” next week. By our preliminary rough and rounded estimates, the bill released would add $5 trillion to primary deficits through 2034 as written, and over $5.5 trillion to primary deficits if made permanent.

The deficit impact of the bill is well above the Ways & Means allowable increase of $4.0 to $4.5 trillion, so lawmakers will either need to make adjustments, include offsets, or both. It is also 50 to 60 percent more expensive than extending the Tax Cuts and Jobs Act (TCJA) portions of the bill – meaning it could add $1.5 to $2 trillion more to the deficits above current policy. Notably, the bill does not include any cap on the state and local tax (SALT) deduction, and it also does not include any additional tax cuts that President Trump has proposed, such as cuts to taxes on tips, overtime, Social Security benefits, and domestic production.

 Ways & Means Draft Exceeds TCJA Extension's Deficit Impact

Sources: Committee for a Responsible Federal Budget estimates, Congressional Budget Office, Tax Policy Center, Ways & Means Committee, Joint Committee on Taxation. Estimates are rough and rounded to the nearest $50 billion. Note: table has been updated to reflect JCT revenue estimate; line items are not apples-to-apples comparisons due to different stacking of provision estimates.

The draft would not only extend but also expand most parts of the TCJA. For example, extensions of tax rate cuts would be coupled with a further increase in most bracket thresholds – effectively undoing the original TCJA’s savings from indexing the tax code to the chained CPI. The estate tax exemption would also be increased from roughly $14 million to $15 million. And the 20 percent 199A pass-through deduction would be increased to 22 percent and expanded in other ways.

At the same time, the draft would temporarily boost the standard deduction by an additional $1,000 to $2,000 for four years and boost the Child Tax Credit by an additional $500 (from $2,000 to $2,500). We estimate these expansions will add about $300 billion to the deficit impact of extension as written but roughly $700 billion if made permanent.

Our estimates of these provisions and their permanency are very rough and preliminary, but they represent the order of magnitude we expect the Joint Committee on Taxation would estimate.

If added to the other reconciliation bills released so far and including interest, released parts of the reconciliation bill would add roughly $6 trillion to the debt as written and $7 trillion if made permanent. Without further offsets, that would boost debt to 134 percent of Gross Domestic Product (GDP) by 2034, compared to 117 percent under current law. As we’ve shown before, such high levels of borrowing could substantially boost interest rates, slow economic growth, and spark a debt spiral. Lawmakers should make the necessary adjustment to proposed tax extensions and offsets to ensure the final bill does not add to the debt or rely on budget gimmicks.