President Donald Trump’s signature tax bill narrowly passed the House Thursday morning, advancing a sprawling multitrillion-dollar package that would avert a year-end tax increase at the expense of adding to the U.S. debt burden.

The bill now heads to the Senate, where groups of Republicans are pressing for extensive change. Lawmakers plan to vote on approval by August. The bill includes a $4 trillion increase in the U.S. debt ceiling, which the Treasury Department forecasts could otherwise force a default as soon as August or September, adding urgency to the timeline.

The 215-214 House vote, with one abstention, was met with cheers from Republicans in the chamber. It followed a furious offensive by Trump, who visited the Capitol to rally Republicans, worked lawmakers by phone late into the night and summoned holdouts to the Oval Office. His budget office released a statement branding any GOP lawmaker who failed to support the package guilty of the “ultimate betrayal.”

Trump took a victory lap on his social media platform Truth Social Thursday morning, calling the One Big Beautiful Bill Act the “the most significant piece of Legislation that will ever be signed in the History of our Country!”

“Now, it’s time for our friends in the United States Senate to get to work, and send this Bill to my desk AS SOON AS POSSIBLE! There is no time to waste,” Trump said.

House Speaker Mike Johnson and his lieutenants went through rounds of negotiations steps from the House floor to balance the demands of lawmakers from high-tax states pressing for an increase in the state and local tax deduction. Hardline conservatives insisted on deeper spending cuts and vulnerable swing-district Republicans were wary of slashing Medicaid.

The measure would avoid a blow to U.S. growth just as the economy struggles with the impact of the steepest tariff increases in almost a century, though it’s expected to add hundreds of billions a year to the deficit.

It would extend Trump’s first-term tax cuts due to expire Dec. 31, along with new tax relief including raising the limit on the deduction for state and local taxes to $40,000 and temporarily exempting tips and overtime pay from taxes.

Cuts to safety-net programs such as food stamps and Medicaid health coverage for the poor and disabled could worsen economic inequality even as wealthy Americans gain the largest share of tax cuts. 

Deficits driven by the tax cuts also risk exacerbating bond investors’ concerns about the ballooning U.S. debt, highlighted by Moody’s decision to downgrade the U.S. government’s credit rating.

Democrats vowed to make House Republicans pay a price in next year’s midterm elections, casting the measure as a Robin Hood-in-reverse effort to take from the poor and give to the rich.

“The GOP tax scam will hurt working families the most while delivering massive tax breaks for billionaires like Elon Musk,” said House Minority Leader Hakeem Jeffries of New York.

Republicans counter that their voters will be energized by enactment of Trump’s top legislative priority for the year and reward them politically. 

Spending cuts

Ultraconservative Freedom Caucus members were able to insert new language in the bill that would dramatically speed up the end of clean energy tax credits passed under the Biden administration, which would generally have to be put into service before 2029 and would have to be well under way within 60 days of the bill’s enactment. The hardliners also were able to move up the start date for new Medicaid work requirements to December 2026 from a 2029 start in the initial version of the package.

The acceleration of new Medicaid work requirements could become an issue in the midterm elections — which fall just one month earlier — with Democrats eager to criticize Republicans for restricting health benefits for low-income households.

Johnson was also able to strike an elusive deal with lawmakers from high-tax states on the state and local tax deduction. The deal would raise the $10,000 cap to $40,000 for individuals and joint filers starting this year, with a phase-out for those making more than $500,000 per year. The cap would increase by 1% a year for 10 years.

Other sweeteners were added for states like Texas, which would be the main beneficiary of $12 billion in reimbursements for state border security expenses incurred in recent years. And GOP leaders eliminated a provision that would have cut federal pensions by basing benefits on the highest five years of salary rather than the highest three, in a move cheered by Republican Representative Mike Turner of Ohio, who called the pension cut “unfair.”

The package also imposes tax increases on targets of Trump’s ire such as Harvard University and immigrants. Private universities with large endowments per student would pay a 21% tax on net investment income, up from the current rate of 1.4%. Immigrants would face a new levy on transfers of money to foreign countries.

The bill would boost military spending by $150 billion and add $175 billion for immigration enforcement, both top Trump priorities. It also includes numerous other provisions affecting health care, energy production and manufacturing, reorienting the government away from climate change concerns in favor of fossil fuels.

That includes the elimination of most EV tax credits, including for market leader Tesla, by the end of 2025, replaced by a tax break for auto loan interest for U.S.-built vehicles, a move championed by Trump and Ohio Senator Bernie Moreno.

Late changes to the bill even included changing the name of new savings accounts for babies born in the next few years, to be seeded with $1,000 from the government. It’s now “Trump” accounts instead of “MAGA” accounts.

Republican senators have said they will press for substantial changes before approving the package.

A number of Senate Republicans want to make permanent tax cuts that are now temporary under the package, especially breaks benefiting businesses. Some GOP senators have warned against any cuts to Medicaid. Others have pushed for far deeper overall spending cuts.

I didn’t want to say this before tax season ended, but my guess is this has to be the best time in all the history of the income tax and the Internal Revenue Service to cheat on your taxes.

(Not that anyone should cheat, of course. They definitely shouldn’t; taxes are the price we pay for living in a civilized society, and all that.)

But think about it: The IRS, already weakened by a decade or more of budget cuts that saw their top talent bleeding away through attrition, has lost a tenth of its workforce in just the past few months, and now that tax season is over, all the fired employees who were held over until April 15 will actually be leaving. Its leadership is in shambles, with five commissioners in as many months, and the confirmation hearings for the man who is supposed to take on the job full-time only happening this week, as well as a number of senior leaders resigning over policy differences with the Trump administration and its Department of Government Efficiency.

(Again, I’m not saying that you should cheat on your taxes — you definitely shouldn’t — but if you wanted to, purely hypothetically speaking, you could hardly pick a better time to do it.)

Audit rates, which were already ridiculously low, can only drop as experienced staff retire or are driven out, leaving no one to train new employees, which is fine because many of those new employees were themselves driven out right at the start of the current purge. Unless you fill out your return in human blood or ask for your refund to be direct-deposited to a numbered Swiss account, the likelihood of your being audited is almost negligible.

(Still, you totally should not cheat on your taxes.)

Now hypothetically, you might be worried that, even though there aren’t enough human staff to come after you, the IRS might be use technology to catch you, but all those staff cuts are hampering the agency’s IT projects too, and much of the money they were supposed to get from the Inflation Reduction Act to help improve their tech has been clawed back, so I wouldn’t worry too much about it.

(Seriously, though, please don’t cheat on your taxes.)

It’s just that it really does seem like a once-in-a-lifetime opportunity to cheat. The one agency that can stop you — also the one that delivers almost all of the government’s revenue — has been hobbled so comprehensively that if you were actually planning to create an environment for tax evasion, you could hardly do better. It’s OK to talk about this now, of course, because tax season is over and it’s not like any of the people on extension would want to cheat, or like anyone would try to cheat on their quarterly estimates or on the payroll taxes their company is supposed to hand over because they thought the IRS was so weak it wouldn’t catch them.

No one would do that, right?

The tax reconciliation bill making its way through Congress is expected to add trillions of dollars to the national debt, but the Trump administration hopes to offset the cost through income from tariffs. Accountants are helping worried companies deal with the possible fallout.

“Obviously, tariffs create a lot of uncertainty,” said Tom Alongi, a partner and U.S. national manufacturing practice leader at UHY, a Top 50 Firm based in Farmington Hills, Michigan. “But with uncertainty for U.S. manufacturers, it creates a lot of opportunity. And for those that are contract manufacturers that use a lot of offshoring, it creates a tremendous amount of angst, especially among the auto industry that really over the last three decades has turned into a global supply chain as we’ve been in a race to the bottom to reduce costs.”

UHY has been helping CFOs deal with the changing tariff policies coming out of the White House. “A lot of companies don’t even realize how deep some of their supply chain and where some of their raw material and purchased components ultimately originate,” said Alongi. 

That involves quantifying the impact, understanding the origin of components and raw materials, and where that fits in the Harmonized System that’s administered by the International Trade Administration, making sure everything is classified correctly. 

The Trump administration hopes to convince more companies to relocate their manufacturing operations to the U.S. But companies are also looking at changing their sourcing to other countries if they’ve been relying too heavily on Chinese-made supplies amid the ever-changing tariff pronouncements.

“That uncertainty does create challenges within our clients of allocation of capital,” said Alongi. “Do I make big bets to transition if I have a huge amount of risk that is isolated in a certain country? What do we potentially do to mitigate that risk?”

Auto manufacturers need to look at the proposed changes to tax credits in the tax bill, including reductions in electric vehicle tax credits and other tax incentives for renewable energy.

“I always knew that it is a great alternative source that fits certain consumers, but I never believed that it was going to take over the world,” said Alongi, who has been driving an EV for over seven years. “The tax credits create a behavior, and they incentivize people to drive electric.” 

The shortcomings in the national infrastructure for charging EV batteries disincentivize broader takeup, and the disappearance of the tax credits would make the vehicles even less affordable.

CBIZ, a Top 10 Firm based in Cleveland, launched an Integrated Tariff Solutions program earlier this month for its clients nationwide, offering support across finance, operations, supply chain strategy, tax and compliance. 

“Like so many other middle-market companies, certainly the larger companies, in this environment, there’s more demand for advice on mitigating exposure,” said Mark Baran, managing director of CBIZ’s National Tax Office. “Tariffs have been relatively low for a long time, and now the supply chain, pricing, vendor relationships and locations of where goods are manufactured need a fresh look.”

Different industries are looking for help, including manufacturing, construction and import. “They’re really looking at how to mitigate these costs, which don’t appear to be slowing down,” said Baran. “It could be temporary, but it’s not right now. So we have developed a number of different avenues to assist our clients, whether it’s evaluating inventory and how to properly account for inventory, whether it’s seeking to help them find locations in the U.S. if they want to bring their manufacturing back to the U.S. and do that in a tax efficient manner. We’re looking at intercompany transactions and layering transfer pricing concepts onto customs, seeing if we could help with savings in that regard. Depending upon what a client does and their structure, there’s probably a number of ways you can tackle tariffs and get ahead of it. “

Customs valuations are important. “It’s really ensuring that you have an accurate customs valuation, and oftentimes that wasn’t looked at accurately, and there are savings that can result from that,” said Baran. “These are considered an intercompany framework, oftentimes on the businesses that are most impacted by this. Looking at that structure is another way of doing this, not just not just transfer pricing, but location-based analysis. It’s taking what has been decades of international tax knowledge and layering on customs, and that’s providing a framework that’s been tested and works and is valuable.”

Baran has also been keeping a close eye on developments with the overall tax legislation. House Republicans have come under pressure from President Trump to finalize the bill this week, but that won’t be the end of the story. “What’s waiting for them at the Senate tells me that this bill may not look the same because there’s already opposition from the Senate, and the Senate has a lot of rules that they need to follow,” said Baran. “The Senate has concerns, and the Senate instructions in the budget reconciliation concurrent resolution are very different than the House, so you may have a House and a Senate that’s producing two completely different bills. While it’s nice to report and discuss all of the changes that are coming out of the House, I think people should just keep in mind that the Senate is next, and do not assume that they will follow suit. So the ultimate bill that’s eventually produced is going to look a lot different than it does now.”