Background on the Tax Bill and Its Proposed Changes
The proposed changes by Republican senators to President Donald Trump’s broad tax cut and spending bill could potentially elevate the U.S. debt levels, aligning with a version already approved by the House of Representatives, according to analysts.
Republican Senators’ Proposed Changes
The Republican senators unveiled the proposed changes to the tax bill that the House of Representatives approved last month. These proposals, subject to negotiations, would make certain business-related tax exemptions permanent while limiting the deduction for state and local taxes on income.
Impact on U.S. Debt
Alec Phillips, an analyst at Goldman Sachs, stated in a note on June 17 that “the fiscal effects of the Senate legislation in its current form are likely to be similar over the next few years to those of the bill passed by the House.”
The proposed amendments will likely add “at least hundreds of billions of dollars” to the estimated 10-year cost of the legislation, Phillips added.
The bill passed by the House of Representatives is estimated to add $2.4 trillion to the U.S. public debt over the next 10 years, or $3 trillion if interest costs are included. This estimation was made earlier this month by the Concord Coalition, a nonpartisan budget watchdog.
If lawmakers extend the temporary provisions, the cost could reach $5 trillion over a decade, according to the Concord Coalition.
Senate’s Regulation of Stablecoins
In a separate development, the U.S. Senate approved on June 17 a bill to regulate stablecoins, a type of cryptocurrency pegged to assets like the U.S. dollar.
The bill was passed with 68 votes in favor and 30 against. It will now move to the House of Representatives, where its fate remains uncertain.
Key Questions and Answers
- What are stablecoins? Stablecoins are a type of cryptocurrency designed to minimize price volatility by pegging their value to assets like the U.S. dollar, a basket of currencies, or commodities.
- Why regulate stablecoins? Regulation aims to protect consumers, maintain financial stability, and prevent illicit activities. Given their growing use in everyday transactions, there’s a need for clear guidelines on their issuance and usage.
- What does the Senate bill entail? The approved bill seeks to establish a regulatory framework for stablecoins, including licensing requirements and oversight by the Federal Reserve.
- What happens next with the tax bill? The amended tax bill, incorporating the Senate’s proposed changes, must now be reconciled with the House version before it can be sent to President Trump for signing into law.
