CBO: Deficit impact of the reconciliation act could reach $5 trillion. In a new analysis responding to a request from Sen. Jeff Merkley (D-OR), the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) estimate that the 2025 budget reconciliation act will increase federal deficits by $4.1 trillion over the 2025–2034 period, once debt-service costs are included. If Congress makes permanent 10 temporary tax provisions in the law, the total deficit impact would rise to $5 trillion.
SALT deduction sweetener or surprise torpedo? President Trump’s recently enacted tax law raised the federal cap on the state and local tax (SALT) deduction to $40,000 starting in 2025, indexed upward through 2029. But the benefit phases out for those earning between $500,000 and $600,000, creating what tax advisors are calling a “SALT torpedo.” Those with income in that range could face an effective federal marginal tax rate of 45.5 percent.
Colorado braces for budget fallout from the new tax law. Colorado could lose up to $1.4 billion in state revenue this year due to the One Big Beautiful Bill Act (OBBBA), according to the state's budget director. The shortfall is already forcing discussions about spending cuts and the possibility of a special legislative session. Colorado’s reliance on federal taxable income for calculating its own income tax leaves it particularly exposed to changes in federal tax policy. In later years, the bill’s Medicaid provisions and reductions in SNAP funding are expected to shift billions in additional costs to the state.
Capital gains break on home sales? President Trump floated the idea of eliminating capital gains taxes on primary home sales. That might ease the lock-in effect for some longtime homeowners, but economists say the biggest beneficiaries would be affluent sellers in high-price areas like California, where 40 percent of gains over $500,000 are concentrated, according to Realtor.com. Critics argue the change could worsen affordability by increasing demand without addressing housing supply.
Trump tariffs, updated. TPC’s tariff tracker has been updated to reflect President Trump’s latest announcement of new reciprocal rates for over 100 trading partners. The tracker includes the latest country-specific changes and estimates of potential impacts on federal revenue, households, and the economy.
Tax policies that don’t deliver much for most households. From deductions for tips and overtime to tax relief for seniors, TPC’s Howard Gleckman finds that many of the popular tax changes in the One Big Beautiful Bill Act will have limited reach. In 2026, only about 3 percent of households will benefit from the tip income deduction and just 9 percent from the overtime pay deduction according to TPC’s preliminary estimates. A new $6,000 deduction for seniors will help fewer than half of older adults, and virtually no low-income retirees. Meanwhile, TPC’s Margot Crandall-Hollick explains how the bill’s changes to child care tax benefits will mostly help higher-income families. Many low-income families will continue to see little or no benefit.
Shrinking resources, shrinking insights; greater transparency, greater support? As the IRS faces steep staffing cuts, TPC’s Barry Johnson warns that the suspension of the Statistics of Income Joint Statistical Research Program could limit independent analysis of the tax code just as the One Big Beautiful Bill Act takes effect. The program has supported nearly 100 research projects, including many on tax administration and compliance. Meanwhile, Brookings Institution’s Imari Stewart, Ian Berlin, and Bill Gale explore whether earmarking taxes for deficit reduction could help restore public trust and shift fiscal outcomes. While far from a panacea, the authors argue that greater transparency and accountability could build political support for tough budget decisions.
A new TPC co-director. Elena Patel has been named co-director of the Urban-Brookings Tax Policy Center. A former Treasury official and academic economist, “Elena brings a wealth of experience in research and policy, and a strong commitment to making the tax system work better for people,” said Tracy Gordon, Vice President, Tax Policy, at the Urban Institute and TPC co-director. Bill Gale, the Brookings Institution’s Arjay and Frances Fearing Miller Chair in Federal Economic Policy, a TPC co-founder, and, for the past 23 years, a co-director, said, “Elena possesses a combination of academic prowess, policy know-how, and fervent passion that will benefit the Tax Policy Center and the policy community more generally.”
The Daily Deduction will post once a week until Congress returns from its August recess. It will resume its regular schedule on Tuesday, September 2, after Labor Day.
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 (once weekly when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky.
