Every piece of legislation has to start somewhere, and for tax legislation that somewhere is the U.S. House Committee on Ways and Means.

Before ideas are turned into legislative text there is an abundance of work being done behind the scenes to lay the groundwork. The committee chair surveys committee members for their ideas, priorities, and concerns to develop a bill that is likely to pass when the committee votes.

Last week Friday, the Committee on Ways and Means released what is called the “chairman’s mark” of legislation to extend many provisions of the current tax law beyond their scheduled December 31, 2025, termination.

The chairman’s mark serves as the baseline for the legislation to which committee members can offer amendments. If the bill, as amended, passes the committee, it is then eligible for consideration on the House floor. In this particular case, the tax legislation will be combined with a number of other bills from other committees to conform with Congressional budget rules.

One of the more surprising aspects about this particular chairman’s mark is its overall length. As initially proposed, it is an amazingly thin 28 pages long. I suspect its heft will increase over time.

An additional surprise is what is NOT in the chairman’s mark. There are no provisions exempting tips, overtime, or Social Security benefits from federal taxation. Given these were included in the President’s campaign pledges, it is likely these will be inserted later in the legislative process.

One thorny issue that also is currently unaddressed in the chairman’s mark is the tax deductibility of state and local taxes (SALT). SALT deductions are currently capped at $10,000 per year if a taxpayer itemizes their deductions. Representatives from high-tax states have stated they will not vote for tax legislation that does not increase or eliminate this cap, so this will also likely be addressed in the future.

As expected, the chairman’s mark does “permanently” extend most of the current income tax rates and provisions which expire at the end of this year, but there are also some unexpected new proposals.

For tax years 2025 through 2028, the chairman’s mark proposes temporarily increasing the standard deduction by $1,500 for married taxpayers filing jointly. Additionally, it proposes temporarily increasing the child tax credit from $2,000 to $2,500 in tax years 2025 through 2028.

The proposed bill increases the Qualified Business Income deduction from 20% to 22% and makes it permanent. This provision is designed to equalize the income taxes between large corporations and small businesses.

On the estate tax front, the chairman’s mark increases the federal estate tax exemption to $15 million starting in 2026. This is a slight increase from the current $13,990,000 exemption amount.

This is only the beginning of this bill’s journey, and there are likely plenty of changes that will be made by the House Committee on Ways and Means, the U.S. House of Representatives, the Senate Committee on Finance, the U.S. Senate, and, if it passes all of those bodies, a Senate-House conference committee. Then the conference committee’s bill must pass both the House and Senate before the President can even consider signing it into law.

As designed from its inception, the legislative process is slow and methodical. We will be monitoring this bill’s progress very closely to determine how it could impact your long-term financial plan.

Quote of the week: Voltaire: “The most courageous decision that you can make each day is to be in a good mood.”

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