The legislation extends tax cuts and adds trillions in new debt. House Republicans passed the bill early Thursday. The bill extends expiring provisions of 2017 Tax Cuts and Jobs Act and adds new breaks for tips, overtime, and seniors. The bill also boosts defense and border funding, and raises the SALT deduction cap to $40,000 for joint filers earning under $500,000. The Congressional Budget Office (CBO) projects the bill would add $2.4 trillion to the debt over 10 years, even after over $1 trillion in safety net cuts, including changes to Medicaid and SNAP. Medicare could face automatic cuts unless Congress adjusts spending caps. The Senate is expected to make major revisions.

Senate unanimously passes tax breaks for tips. The Senate unexpectedly passed the No Tax on Tips Act on Tuesday via unanimous consent. The bill allows employees earning up to $160,000 to deduct up to $25,000 in reported cash tips from taxable income. While the measure enjoys bipartisan support and aligns with President Trump’s campaign promise, critics warn it may encourage wage misclassification and reinforce a two-tiered pay system.

Global tax tensions rise. A provision in the House bill would impose higher taxes—up to 20 percentage points—on foreign companies based in “discriminatory” countries that enforce the Organization for Economic Cooperation and Development’s global minimum tax rules. Tax and trade experts warn that the measure could ignite a new front in the economic tension between the US and European Union. The issue is expected to surface at this week’s Group of 7 finance ministers’ meeting.

IRS bots struggle amid staffing cuts. New data show declining performance from IRS chatbots and voicebots, with a drop in issue resolution and a rising share of taxpayers requiring escalation to human staff. Only 22–25 percent of calls led to successful transactions in FY 2024. Experts say the technology still helps with routine queries but warn reduced staffing and underinvestment risk eroding public trust and voluntary compliance. TaxNotes has the full story (paywall).

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky.