May 2025
Join Chris Galeski and Beau Wirick as they unpack what’s in the bill, who it benefits, and what it means for the broader economy.
Tune in if you’re interested in the following:
• How the bill could affect your income and estate taxes in 2025 and beyond
• What the proposed $3.8 trillion in tax cuts and $1 trillion in spending cuts mean for the national debt
• Why this legislation matters for estate planners, retirees, and middle-income households
• What’s next as the bill heads to the Senate—and how fast things could move
Note: This episode was filmed on May 22nd, 2025.
Watch previous episodes here:
Ep. 139 Women & Finance | The Next Era
Ep. 138 An Inside Look at How We Make Investment Decisions
Hello, everyone, and thank you for joining us for another episode of THE FINANCIAL COMMUTE. I'm your host, Chris Galeski, joined by wealth advisor Beau. Thanks for joining me today.
It's a big day Chris.
Ready to talk about taxes?
I love talking about taxes in general. I specifically love talking about taxes when a huge tax cut bill has just passed the House of Representatives.
I don't particularly enjoy talking to you about taxes, but, you know, this one's sort of unique because the current Tax Cuts and Jobs Act that was set, putting forth by President Trump back in 2017, it was set to expire at the end of this year. And so there's been a lot of talk through the campaign all the way to the election and even till now about what's going to happen with the current Tax Cuts and Jobs Act because it was something that reduced taxes for a lot of Americans back in 2017.
It increased the estate exemptions, and there was just a lot in there. And people want to be able to make decisions and sort of know what's going to happen as opposed to, have higher tax bills or have, you know, more complex estate planning that they need to do before the end of the year when these things are set to expire.
So today is a big day. Yeah, it's May 22nd, 2025. I think you just mentioned it was 5/22/25. So this incidental number. So this episode will be released next week. But the House Republicans just passed the One Big Beautiful Bill that contains a lot of, you know, campaign promises from President Trump. The bill passed by one vote, which was the slimmest possible majority, right?
There were a few Republicans who voted no. There was one abstention, and I think one Democratic congressman just passed away the day before. Yeah. And so 215 to 214 was the final vote Republican, Democrat. So as close as it can possibly get.
This bill is proposing to cut taxes by about $3.8 trillion over the next ten years and also cut spending by around 1 trillion over the next ten years. But, you know, several of the tax cuts from the 2017 Tax Cuts and Jobs Act, they're included in this, including the personal income brackets, the estate exemption amounts, the standard deduction.
And so the bill that just passed in the House would make many of them permanent, along with some other provisions here.
Yeah. So it's being branded as a tax cut bill. But I think for us as taxpayers, it's it's actually better to think about it as your taxes aren't going up next year. So like you said at the end of 2025, those 2017 tax cut provisions were going to expire. So our personal taxes were going to go up.
The standard deduction was going to go down. The estate tax exemption was going to go down. So most of this bill essentially just extends and like you said, makes permanent those tax cuts. So not a lot of changes are going to come to say our personal tax brackets. But you're not going to get an increase in taxes.
So you'll see different headlines like this is a big tax cut. It is a big tax cut when you compare it to what it would have been if nothing had happened. Right. And so on the other side, if it's a negative headline, it's saying it's going to add to the deficit by $3 trillion. That's true. If this tax bill had not happened and taxes had gone up like they were scheduled to the deficit or the sorry, the national debt would still have expanded by $22 trillion over the next ten years.
Now it's going to expand by $25 trillion for the next ten years. So it's it's a big difference. But we're talking about ludicrous numbers to begin with.
Yeah. I mean, it just it's astronomical when you think about the current state that the US is in, with the amount of debt that we have and the projection that that's only going to increase over time, that's only one of the things that, that I and we worry about long term is how do we invest, how do we protect, how do we deal with inflation and the protection of dollars when, you know, the US is is straddled with so much debt, it's very hard to lower interest rates when you've got, you know, problems of this amount of debt because, you know, if if I'm in a worse financial position in ten years than I am today and I'm in a, you're going to borrow money for me, are you going to charge me a higher interest rate or lower one, like probably a higher one because I'm not in as good of a fiscally, you know, responsible position. So yeah, that's that's where it stops.
You see that in the bond market. You know, if it's a company with a better balance sheet, you're going to get a lower interest rate. We call it high-yield bonds. For companies that have worse balance sheets. Well, you're seeing the government becoming a more and more high-yield bond. So like today when the bill passed the 30-year Treasury hit 5.15%, which is pretty high over the last, like, you know, recent history.
Yeah. And so that can be concerning. Yeah. To see how expensive it's going to be to finance that debt going forward.
So we're going to give him the details of like what these tax cuts or, you know, the extension of the original tax cuts that were setting forth in 2017. What's in this bill that just passed how it affects it? We're going to get into that in a minute. But before we get into that, what's next?
So this is technically a budget reconciliation bill. And so you think about Congress, you know, how does a bill become law? Usually, you need the House to pass it by a majority. And then typically you need something to pass in the Senate by 60 votes. And the reason for that is the Senate has this rule called the filibuster, where the minority party can essentially kill a bill by delaying it indefinitely, by filibustering it.
If you have 60 votes in the Senate, then you can basically make it a filibuster-proof bill. That's like the Affordable Care Act that was passed in 2010. That was 60 votes. The Democrats had a supermajority at the time, so the Republicans were not able to filibuster it. Right now, the Senate only has 53 Republicans, 47 Democrats. So they can't get that 60 votes.
A budget reconciliation bill can get passed with just a simple majority. So all you need is 50 votes in the Senate and then the vice President Vance can break it. That's what happened with the Inflation Reduction Act in 2022. 50 Democrats voted for it. Vice President Kamala Harris like broke that tie. And so with the budget reconciliation bill, you can do that.
There are some limitations. It has to be something that deals with spending, taxes, and deficits and everything has to be basically financially related. If it were a different bill, if it had to do with like health care, for instance, it would have to be a normal act. So this is a budget reconciliation bill. Next, it has to go to the Senate.
The Senate has to pass the exact same writing of the bill. So the fact that it passed by one vote in the House means there's not a lot of wiggle room for the Senate to come back and negotiate with the House Republicans and say, oh, we want to make X, Y, and Z change. They have to be identical bills before they are sent to President Trump for his signing.
And it's pretty you know, they want to get this signed before July 4th. So things are moving pretty fast. It's it's still a wild ride ahead of us potentially.
And so what's in this what's in this new bill that's being proposed. Because I know that it's set to, you know, keep the current tax brackets adjusted for inflation going forward. So back in 2017, the, you know, the the tax brackets that you're in, not only were they were reduced from the highest possible, you know marginal tax bracket, but the amount of income was increased, you know, to kind of fill in those brackets.
So that's going to become permanent. They're looking to have their state exemption, which is currently, 14 million per person, that's looking to be, you know, set be put in place to, you know, be permanent, but an increase of 15 million per person. There's also the state and local, state and local tax deduction. They called it the SALT limitation. That was capped at $10,000 per person. But people got an increase in their personal exemption amount. So there's a lot of moving parts in there. What's going on with this new bill?
So I think those are the main ones. The estate tax exemption becoming permanent if you're a wealthy individual. And all of a sudden by the end of this year, your exemption went from 14 million to 7 million. Well, you're essentially getting taxed around 40% on that $7 million. And so that's a pretty big deal, especially for the higher net worth. And then having your tax cuts expanded. Those are the two biggest parts of it. A couple of other main points in the bill, though, are the standard deduction has been permanently raised. And then also there's no tax on tips and I believe no tax on overtime, which for workers, like gig workers and stuff, it's a pretty big deal to not have to declare that for federal income. Coincidentally, there was another bill that just passed in the Senate by 100 votes unanimously for no tax on tips. So two bills have now been passed to remove tax on tips. So that looks like that's becoming law for sure.
That's incredible. I wasn't sure how that that was going to work or even happen. But I'm hoping that I can get paid in tips now.
One thing that kind of stood out because the Tax Cuts and Jobs Act, which was set in place in 2017, it didn't help a lot of, you know, property owners here in California because that limitation of $10,000, a lot of us ownd real estate and our property tax bill and the taxes that we pay to California, it's well above that.
So we didn't feel like that, that Tax Cuts and Jobs Act really helped us that much. But now that SALT cap is increased to $40,000, that's for incomes up to 500,000.
Yeah. So if you're again, if your income is higher than 500,000, either single or married, filing jointly, it's not really going to affect you. But for the upper middle class, it's going to become a big deal. Not only are you getting that $40,000 cap on state taxes that you pay, because we pay federal taxes and we pay state taxes, and so those state income taxes, you can write off of up to 40,000, and your property tax, which is considered a local tax.
So oftentimes say you have a $1 million house and you are paying, you know, $10,000 a year in property tax on that. And you're paying $30,000 a year in state taxes. Let's use that as an example. Before this bill, you would only get to write off that $10,000 in your property tax. You wouldn't be able to write off the $30,000 in state taxes that you pay.
So now it's expanding to make sure that you get to write all of those off of your federal taxes. I think that's a pretty big change for Californians and New Yorkers.
It'll be really interesting because I know for business owners and certain professionals or certain entities, they were able to get around sort of that nuance or something called AB 150. It'll be really interesting how that comes into play for the people that have been taking advantage of it. We talked about the increase of the standard deduction through 2028.
And then it lifts the debt ceiling by 4 trillion.
Yeah. So that was actually kind of, you know, it's not talked about as much, but it's a pretty big deal.
This is the spending part of the bill.
Well, yeah. So right now there's every so often Congress will have to lift the debt ceiling because we'll reach $36 trillion, we'll reach $38 trillion. And you have to actually authorize the Treasury to take on more debt. So in this bill, they lifted the debt ceiling by another $4 trillion. If they hadn't done that, or if they don't do it, then, they will run out of money and it will be a technical default around August, according to the Treasury Secretary. So that was a big deal as well. And then a few of the smaller measures that I think are still significant. One is the pass-through deduction for S Corp and LLCs. It's going from 20% to 23%. So a little bit of a tax cut for small business owners.
And that's becoming permanent as far as I understand. And then some child tax credits increase from 2000 to 2500. That's a temporary change through 2028. There's also the Trump tax accounts. So if I have a kid or I'm having a kid in the next month, right. Born in 2025 to 2028, there's an account that the government will automatically put $1,000 in on my child's behalf in an invest it.
And then when you know he turns 21, allow that access to a certain amount at 25, a lot of access to him, to more that he can use for education or health. It's kind of like a 529 account, but not as tax efficient. But you're getting like $1,000 for your kid the moment that they're born. It's like, that's pretty cool.
That is pretty interesting. The other part that was really in the headlines was this no-tax on Social Security.
Now that wasn't able to be put into this bill fully. But there's that $4,000 deduction for people over the age of 65. And it phases out for higher-income workers. Now, you know, for a lot of people where Social Security is your only source of income in retirement, you weren't paying taxes on that income anyway. Yeah. But now this $4,000 deduction can help a lot of people that are sort of in that lower middle class, that maybe part of their Social Security was taxable.
And now they're getting a deduction. And so some part, some form of his no tax on social Security is becoming, you know true.
Yeah, a lot of this. We have to remember that a large portion of Americans can't cover like a $400 emergency. If you're getting a $4,000 tax deduction and you're even in the 10% tax bracket, that puts $400 in your pocket. And for a lot of Americans, that's a lot of money. And so, again, where we live, it's it's hard to think about that.
But some of these tax cuts are very meaningful to the lower end of the spectrum. However, let's talk about the spending cuts on it because that is part of the bill as well. $3.8 trillion in tax cuts. But then there's about $1 trillion in spending cuts as well. A lot of that is coming from, phasing out the electric vehicle subsidies that, the Biden era electric vehicle subsidies, those are phasing out very quickly.
And then also there's going to be means testing for Medicaid and for the Snap program, the Supplemental Nutrition Supplemental Nutrition Assistance Program. I believe that's what it is. So instead of just being able to apply for this, if you're low income, if you don't have kids, and if you are able-bodied, like if you don't have a disability, then you can't qualify for these programs unless you work 80 hours a month or 20 hours a week.
And so that's basically putting a little bit more pressure on, you know, essentially young workers who can work, who don't have kids, who don't have dependents. It's like, hey, if you're going to apply and qualify for these programs, you're going to have to put some skin in the game. And so that's cutting the spending from the federal government quite a bit.
There's been some talk as to whether the states would have to, you know, supplement some of that, those cuts. And so I think there's a lot of headlines that you read on that, and it's going to be interesting to see how that plays out. Is it really going to hurt the lower class or is it going to, you know, just cut fraud waste and abuse it, you know, to be seen?
Yeah, a lot a lot to unfold here. One thing that I found interesting that stood out because we've been talking a lot about tariffs and the increase in prices, while interest rates are higher today than they were, pretty much 16 of the last call it 20 years, you know, or 19 years. Yeah. I remember not long ago, before interest rates rose, I was able to get a car loan and, you know, less than 1%. So five years, borrow money for less than 1%. That feels like free money.
Today, if you're going to go buy a car, you're paying anywhere from like 5 to 7.5% interest. And even for people that have really good credit. But there's something in this bill that allows you to deduct interest on car loans. Was that $10,000, the interest on an up to $10,000 of a loan for a U.S manufactured car?
Yeah, I believe assembled in the US is what it has to be. So to be able to deduct that interest, it essentially makes the price of me buying a car that much less, right? A lot of people with a low mortgage have a higher car payment than their mortgage payment. If your mortgage payment is $1,000 a month, if you don't live in California, but your car payments $1,100 a month, this is going to materially affect how much you can afford when you buy a new vehicle.
Yeah, it's amazing how much cars have increased over time. And I think we came across something that around $800 a month is the average car payment and saying, yeah, that's just a lot. So, you know, when you look at this and how it sits today, obviously we've been living in the Tax Cuts and Jobs Act.
You know tax situation for, for quite some time now that we know that there's a chance that this might become permanent. Who do you think this really benefits?
I think it benefits most everyone. Except for, again, the people who are living off of SNAP and Medicaid. There are some people who are going to be hurt by this. And I don't know if hurts the right word, but they're going to lose their benefits. And again, I think the way the bills written is, is so that, you know, if you are able-bodied and you don't have dependents, it's kind of incentivizing you to go back to work.
But there's some people that that's not the only factors that they're on, you know, Medicaid and Snap for. So there is going to be some difference there. But for all of us, we're getting not necessarily a tax cut, but we're not getting a tax hike. And it's hard to imagine what it would be like if next year we woke up and we had 5000 more a year in taxes, 10,000 more a year in taxes, 20,000 more a year in taxes, which would have happened for the vast majority of Americans if this hadn't passed.
So I think almost everybody is benefiting from this.
Look, I think if you ask most people, would you like to pay more or less taxes? Most people would say, I would like to pay less taxes. But then you ask them a follow-up question. Do you like the way that the government most of the time spends the money? The answer is no, right? Probably not. And that's why we're in this situation where the US from, you know, years of making these decisions, I mean, going on 20 years of basically overspending, we wake up today and we're 36 trillion and change in debt, and we're projecting for that to get worse.
That's one of my biggest concerns when I see stuff like this. I mean, I don't want to see the highest marginal bracket go back up to 90% like it was, you know, in the late 70s. But at the end of the day, I think that if most people live their life the way that the government has been spending money for the last several decades, it's just unsustainable.
And that's one of my biggest fears.
Yeah, I think that the fears of inflation have really been stoked again with this, but I want to bring it back to even if this bill hadn't passed, the Congressional Budget Office still predicted that the debt would increase by 22 trillion over the next ten years. Now it's going to be 25. We, regardless of this bill, we have a debt problem.
And so this wasn't really going to move the needle on that too much.
So this is going to Congress. And then when are we hoping to make a decision?
Now, it's going to the Senate. The Senate has to pass the exact same writing. So if the Senate makes any changes on this bill, they will send it back to the House of Representatives and they have to ratify it again before it can get sent to President Trump. House reconciliation and Senate reconciliation have to be identical wording.
And then Trump gets to sign it. Yeah. And he's hoping to sign it before the 4th of July. So we'll see.
I'm sure that there's a lot of people that are looking to possibly make some decisions around estate planning. Even better, understand how these proposed changes are going to affect them. CPAs and estate planning attorneys are still going to be very busy between now and the rest of the year. But this could delay the need to have to make some pretty large decisions around estate planning before December 31st of this year.
And so that helps people have more time to make some better decisions.
Yeah. If this bill fails, estate attorneys are going to be scrambling.
Beau, I don't always love talking about taxes. But, you know, thank you so much for coming on, talking about kind of what's in this bill. And then the headline today and then also the next steps here. But you know, we'll see what happens with this.
We like our gold position right now, that's for sure.
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