Welcome to Something More with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president and financial advisor at Wealth Enhancement Group, one of the nation's largest registered investment advisors. We call it Something More because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter.
Here he is, your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. Welcome everybody to another episode of Something More. I'm here with Jeff Perry and Russ Paul. We are of the AMR team at Wealth Enhancement Group. Glad to have you with us. House of Representatives successfully did it. They were trying to get something passed before Memorial Day weekend.
So last week, the One Big Beautiful Bill, as it's known as, did successfully get passed by the House of Representatives. Now, that doesn't make it law. As we remember, our schoolhouse rock has to go to the Senate. And then in this case, unless it's the same bill, it has to go back to the House for a final agreement, approval of things. They hash things out. And then assuming everyone's in agreement, it goes to the president for signature before it becomes law.
So there's a lot of things that could change still, but we're going to talk about some of the highlights of what appear to be, at least preliminarily, in this bill. So just at a high there's so much. I mean, what is this thing? A thousand page bill. So I was going to tease and say, well, you have to pass it before you can read it. But that's a different, that was a different That was the health care bill. That Nancy Pelosi said, yeah. Right.
So in any case, for fun, let's what if that's for sense of fun, I'll grant you, but let's go through some of what we've got in this proposed legislation. Jeff, I think, you know, maybe we should start with a lot of this is intended to extend or make permanent some of the features of the Tax Cut and Jobs Act from 2017. Well, you referenced the so-called bill, whatever your language was, that's the title of this bill. This is house one. One big, beautiful bill is the title of the bill.
And, you know, a long time ago, when our founding fathers were debating this new system, they talked about something called the single subject rule, where you only put items related to each other, like spending, or if there was a tax bill that would be separate, or if there's a border bill that would be separate, or if there was this bill or that bill, they'd all be separate. This is not that.
This is, this is the one big, beautiful bill, which is an attempt, in my view, to pass through the promises that candidate Trump made. And I think he wants one bill, obviously, based on the name, it's, you can see the influence on it. But he wants one bill because the next election is pretty far away. And these are his agenda items, the closer it gets to the next election, the more that congressmen are worried about their votes.
So this is a bill that's full of things that he promised on the campaign trail. And you're right to point out that a signature part of this bill is the making permanent the tax cuts, tax rates that were under the Tax and Jobs Act. They are sunsetting this year, if we don't continue them. Yeah. And this House version, which did pass by a whopping one vote, 215 to 214, right? I think a couple of presents just to allow it to get through, right?
Yeah. A present vote is, you've turned my arm so much that I don't... I won't vote against it, but I won't vote for it. Yeah. No one's going to be able to hold the roll call up and me have a Y next to it for yes. Yeah. It's a very political vote, non-vote. But yes, so the signature piece, there's a lot to talk about, as you mentioned, but the signature piece is making these tax cuts permanent, no more sunsetting. And I think, I don't know, most people love a tax cut.
So I don't think that's the foundational problem with the bill. There's a lot of missteps, but there's a lot of other things. Just to go through a few highlights from his, to make it political for a minute, of the things that he promised, right? So he promised the tax cuts. He promised that he would make no taxes on tips and overtime, which is in the bill. He promised, President Trump promised more money for the border. There's more money for the border in there.
He promised more military spending. There's more military spending in there, including something that was not discussed, which is a hilarious name if you think about it, $25 billion for the Golden Dome. Yeah. I don't know. Oh boy. You gotta laugh. I mean, this is all on purpose, obviously. So some of his signature things are in there. I think the one missing thing out of all that, and there's a lot more that we can talk about, but just to not talk the whole time.
I think the missing thing are significant cuts to spending. If that's one of his, with Doge and one of the promises that was made to the American people, it is not achieved in this one big, beautiful bill. No. I think there's expectation that this would cause increases. And to recall what the number was, a couple, $3.8 trillion, I think, over 10 years. However, that's a little bit misleading, I think, because we're already outspending.
So it's not to say that over 10 years, our Congress would only outspend their revenues by $3.8 trillion. It's that this would just add an additional $3.8 trillion. So if we're outspending, I don't know, $1 to $2 trillion a year, depending on how you want to calculate it. But this would add another $3.8 trillion on top of that $1 to $2 trillion a year for the next 10 years. Then you're putting another, call it $4 trillion on top of that. Right. Nothing close to a balanced budget, for sure. Right.
Right. And adding to the national debt of another roughly $400 million on top of the shortfall we already have. Jeff, this is a little off topic, but given, I know your preferred approach to policy would be lower taxes to generate more economic revenue, that that's the way you'd ideally facilitate a way to get out of this, cut costs, cut spending and not raise taxes type of an approach. Do you think that's possible at this point with the amount of deficits we're running?
Do you think that we can cut our spending sufficiently to not have to raise taxes? I think it's possible, like mathematically possible, if the federal government focused in on what the role of the federal government should be and what we can, most of us can agree what it should be. But I don't think it's politically possible at this time. It would take a long runway maybe for the reduced rate of spending.
Like if you said, oh, we're going to not just cut spending, but curb the growth of spending as a way to try to do it. But even that, I really am as much as, I love the idea of being able to do that. I just am at a point where you look at what's in government spending and like, it's where would you cut? You know what I mean? So there's a limit to how much you can cut. And when we think about entitlements having some shortfalls on the horizon, we talk about social security more readily.
We don't talk about Medicare all that much, but I know that's a similar kind of challenge that just strikes me as probably going to be a painful rude awakening at some point where we're getting the benefit of lower taxes now, but that may not be the case a decade from now or maybe less than that.
And so I think when it comes to planning, clients and listeners should, if this passes, take advantage of the window you have with lower tax rates because it's going to be challenging to keep those rates lower in the future. Yeah. Anything you said about my political philosophy is true. So I'm going to put that out there as I'm not disagreeing with your description of it. I'd go even further. I mean, that would be my preference too.
I think I'm more with Senator Rand Paul in the Senate who has said this bill is still too bloated. And the president made some big promises that aren't in the bill that would have saved money, whether or not you agree with them, but I think it has to do with your view of your role of government.
And I think one of the compelling statements from Republicans, including President Trump, but long before President Trump, including President Reagan, that's how far back we can go with this, was the elimination of the Department of Education. I mean, it's not going to save the budget, don't get me wrong, but it is a fundamental discussion, debate of whether or not that is the role of government. Of the federal government. Right.
To collect tax dollars from all the taxpayers and then just basically give them back to the states in different forms, right? And the cost. To facilitate certain activities that are policy objectives, yeah. That's not, in my view, the role of the federal government. In fact, the word education isn't in the Constitution.
And so if you're a strict conservative, and President Trump is not, I'll argue with people all day about this, you would be trying to get back to those principles about what the federal government's role is. And arguably, part of the reason, a significant reason that we have such a budget deficit and national debt is we're doing things far beyond. And the reductions that President Trump talked about during the campaign and others, Republicans, for decades, are simply not in this bill.
Yeah, I mean, I think, I'm not going to challenge you on any of that. But I think, you know, when it comes to, neither is the Social Security and Medicare in the Constitution, or any of, you know, you can point to those types of things. But they are, at this point, I think, social contracts that it'd be hard to change your direction on that. I'm not sure there's a political will to do that.
You know, you get to the point where we can probably make that same challenge on where are we with healthcare and stuff, which, again, not really, you know, something that the role of federal government should have a hand in, other than maybe a regulatory, you know, basis. But, you know, it just becomes a challenge as to how do you navigate these issues, right? I'd separate out Social Security and Medicare, those are entitlements that are earned by payment of additional taxes.
Yeah. So I do put them in a different category than some of these other subjects, for sure. Yeah, it's a good discussion, probably worthy of its own show. It is. My point is not to get into the specifics of any of these things. But I was, you know, starting with the positives that a number of the President's initiatives that he talked about in the campaign are in this one big, beautiful bill.
But if you were to give him a grade about the percentage of the things that are in the bill, I'm not sure it's a passing grade because these cuts, you know, Doge, for better or for worse, was supposed to like be the initial kickstart to identifying things that many of us fiscal conservatives looked at and said, okay, they're going to dig in, they're going to identify cuts that will be in the budget, the thing and the courts went right along with that.
They stopped the President from making unilateral cuts, because they're part of the budget process. They're part of the congressional process. The President didn't have the executive power to make certain cuts. So it was logical to me that the things that came out of Doge, the campaign or the new administration would be included in this one big, beautiful bill to try to offset some of this additional spending and, and giveaways. I mean, how much how much does it cost us not to tax overtime?
Sure, it's a great thing. It's a great campaign speech. But we can't just keep giving things away to your point about taxes. Yeah, do it. Well, we can do it. But we can't do it by taxing, even at the new even at this now permanent lower rate, perhaps if it passes the Senate.
Yeah, if it were to become permanent, we've taken I don't know the figure I haven't seen yet, but hundreds of millions, billions of dollars off the table that won't be taxed because they were in the form of tips and or overtime. Right?
Sorry, sorry, because one piece that is important to note is that while it's being called permanent, you know, it's permanent for now, I think, kind of to your to your point, the if we were saying for planning purposes, that it's always going to be this these tax rates going forward. And definitely, a lot of plans would be looking pretty great, especially when it comes to the amount we're paying taxes.
But realistically, you know, that might not be that might not be the case permanent is until the rules change. So that's what I keep reading, at least. You're right. And the next administration could another Congress could do it. And as far as permanent, the reduction or the elimination of taxes on tips and overtime is not permanent. There is a sunset, I think it's three years or something. I'll sit on some of the characteristics in here.
I think we expect if this becomes law, which again, stay tuned, there's a lot that has to happen before that's the case. It does maintain some, some small business business deduction, was this the 20% deduction of qualified small businesses. It's the alternative minimum tax changes that made that a higher threshold before people have to worry about the alternative minimum tax would would be extended. When it comes to the estate tax.
Instead of reverting to what was it going to be $7 million or something? Yeah, it would keep the threshold high, perhaps somewhere around $15 million. Individual tax rates, though, we were just talking about these the the rate of tax and the bands of income that puts you into which tax bracket, keep in mind, the tax cut and jobs act, raised the income levels before you hit the next band of higher tax rate, and lowered the rates within each of those bands.
So it's a lower tax rate for most people, when it came to the standard deduction, elevated the standard deduction, so that most people don't have to itemize, they're benefited by a lot of rather large standard deduction. So that would all be made permanent. What were some of the other things? Corporate tax breaks? How did that work out? There were a variety of things that happened in the corporate tax space of assault tax. Let me go back to that.
The state and local tax, instead of it being $10,000 cap, for your real estate tax bill, as an example, there'd be up to $40,000. Was it 40 or 50,000? 40,000. I'd be very surprised that one survives. Yeah, it'll get beat up a little bit. Child tax credit would be increased for a period of time. Was it like five years, I think? Do you guys remember? Oh, no, it was through 2028, I see it here, to $2,500, and then go, which I think it's around 2000 now, but go to $2,000 thereafter.
The tax credits for the electric vehicles and the energy efficient stuff basically disappear in this new bill. I just was getting the impression that that seems also like something that's probably more challenged to get through the Senate, that there will be constituents who will want to keep some of that green energy development and encouragement in the tax code, particularly as it relates to different jurisdictions that have more impact, benefit from that. Any thoughts on that?
In the House process, where it was razor thin, obviously, certain things had to be given to get certain votes. There are a number of Republican congressmen who live in blue states, and so they were pushing no vote unless they get SALT, right? SALT, which is the higher income tax states are affected by that. And many of these things, like the child tax credit and Medicaid, we haven't talked about it, but Medicaid is a big issue with some senators who have been very vocal about it.
I know of two senators who have said they won't vote for the House bill because of the reductions to Medicaid. Yeah, just tell a little bit about that. Right now, Medicaid is covered about half by the state and half by the federal funding. They were looking to change that dramatically. They want to push more on the states, and they also want to, a big part of the bill, which I'm in favor of, it's controversial, but I'll state I'm in favor of it, is work requirements.
And not just work, so this is all part of a compromise that you had, don't get me wrong, I think it's 80 hours a month, but that could have changed, that you had to have employment, education, or community involvement, volunteering. What is meant by able-bodied, I guess, remains to be clarified to some extent, right? Right, and there's an exception for a mother who has a child under a certain age and all this stuff, but the work requirement, I think, has a place.
I don't think there's any reason that people eligible for free benefits who just are able to and make no effort at all to support themselves at all. I think that's, we saw that in President Clinton's tenure with welfare reform and work requirements, and it was very successful by reducing welfare and motivating people to get out in the workforce.
So, my larger point is, when we get to the Senate, there are less, there are less individual things that matter to a given congressional district, and it's more larger philosophical points of view that take root, such as Rand Paul, a senator from Kentucky, he's not talking about a specific part of the bill, he's talking about big spending. A couple senators are just talking about the Medicaid process itself.
So, I think there'll be more policy-driven than this giveaway or that giveaway or that negotiation on this particular element. And so, back to your kind of question about green energy and electric vehicles, that goes more to a policy. Do you want the policy, the tax policy in the United States to be favorable towards green energy and energy efficiency or not?
Yeah. So, I could see, you know, I could see there being a few Republican senators who will support maintaining the status quo, and they wouldn't have the votes to keep it in there. And what is there about a three-senator majority right now? They can lose three votes, there's 53 Republican senators that can lose three, and then if it was a tie, the vice president would come in and be the tiebreaker. Presumably push it over the edge.
So, I haven't seen any issue with three, I mean with four senators, but we'll see. It's the goal, the stated goal from both congressional leaders, Senator Thune, and obviously the House met its initial step, was to have the bill signed by July 4th. Let's come back to talking about that in just another moment. I want to just cover a couple of other things that we maybe hadn't included that were in the, you know, like overview of this.
I think there was something about a limit on what are tax remittances sent abroad? Is that meaning if I pay foreign taxes, I'm limited on how much benefit I get from paying those taxes? I think there's a cap on that. And then there was content about university endowments, going to try and tax them more. And then non-profits, it grants the U .S. Treasury Department the authority to revoke tax -exempt status for non-profits deemed to support terrorism.
That sounds pretty political, don't you think? I think it's a restatement of the current law and political in nature, you know, that the U.S. Treasury and the IRS specifically already have the authority to revoke non-profit status if they're not complying with the non -profit rule. Yeah, yeah, exactly.
But I think this seems like it's trying to politicize some of what's been going on with... I think both of that and the college endowments are taking shots at these big universities that tend to be more liberal and have allegations of supporting activities among students or allowing it that are arguably anti-Semitic and trying to put some pressure on them to change their posture with that. Other comments about the bill? We talked about the deficit.
It said that there was about $2 trillion in spending cuts that you talked about, a lot of that in Medicaid, the food stamps program, SNAP. I think you mentioned clean energy as well. And then you started talking about this issue, so just the probabilities of its success in the Senate. So it does seem that there's... it's not going to be an easy walk in the park to get this through, right? I don't think so.
The president has shown great influence over the party on getting pieces through the legislative process. We talked about the House turning a couple of reps into firm no's to, I'm here, but I'm not voting. It's not an easy thing to do, especially when you I'm pretty ideological. So I won't be surprised if the Senate gets it done. I'll be surprised if it's the same.
So process-wise, which may not be in that it's a bill video, but if the Senate passes something different than the House, amends it, writes their own, it has to go back to the House for an up or down vote. They accept it or they don't. So the House is kind of at an inferior position at that point. If they reject it or don't have the votes to pass, it would be more accurate. The process actually would have to basically start over.
On a good note, process-wise, it's possible that we, the United States, for the first time in a very long time, could have a budget, a bill, passed before the fiscal year starts and goes for the whole year. That would be amazing, right? Wouldn't it? Yeah. I mean, it sounds so foolish, but it would be amazing. We haven't had that in a long time. Supplemental budgets, debt ceilings, all these different terms that were needed.
Well, to that point, let's just talk about, I think there's the risk of volatility over the summer that investors should keep in mind. So we've got this issue, the passage of this legislation. The debt ceiling is its own conversation. Is it tied to the bill? I believe so. I don't know if it made it into the House version, but there was a provision in the discussion about the debt ceiling. I don't know if it made it.
The debt ceiling is one of these issues that is kind of looming out there kind of soon, right? We're already into those emergency measures and all that kind of stuff. And the timeline on that's coming up. I think it's before this bill. This bill, if passed, would take an effect October 1st. Because of that issue, you're saying? No, because this is the budget. Oh, the budget's fiscal year, right? Right. So issues with the debt ceiling are certainly relevant and independent of this bill.
So I think we've got that issue outstanding. Then you've got the the negotiations, the 90 -day delay for most countries comes back to for tariff topic on July 9th. And for China is sometime in August. Do you remember August? Anyway, around about a month later, roughly. So, you know, this summer, we've got a variety of topics coming up that we want to pay attention to.
This being one of the, you know, if we get this legislation passed, I do think that would give markets a little bit of enthusiasm around expectations for the economy and so forth, that this would be a favorable step. We got the tariffs, which I think remain somewhat elusive as to what to expect, you know, and then, and the economic consequence of that. Though, you know, they're clearly there's an effort to suggest that there are deals in the works, you know, that kind of thing.
But what will actually come to fruition in a relatively short time? Or will we kick the can another 90 days or, you know, that kind of thing? Will, you know, we saw the president in the last week do a little bit more social media posting about some of the challenges that are to come, perhaps positioning. But again, you know, one of these challenges scares the markets a bit. We saw the back end of last week. We'll see.
And then this debt ceiling thing hopefully gets packaged into this a little bit to get us past that. Because that's another, we've seen this before where, you know, political chicken, you know, can be problematic. So certainly to market confidence. So lots to watch for. If you are not inclined to do this yourself, you may want to talk to a financial advisor, because I'll tell you, we're paying attention. There's a lot to pay attention to.
And but anyway, if you need any help in dealing with your investments or financial planning, please don't hesitate to reach out to us. Until next time, everybody keeps driving for something more. Thank you for listening to something more with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind, visit us at somethingmorewithchrisboyd
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