How the Reconciliation Bill Favors Tax Breaks Over Family Policies

“It’s closer to a hybrid of traditional Republican approaches to some of this stuff with a dose of some, sort of, characteristic Trumpy populist stuff,” Patrick T. Brown, a fellow at the Ethics and Public Policy Center who studies family policy, told TMD.

Early in the campaign, Trump flirted with the idea of a baby bonus, which would give a direct payment to parents upon the birth of a new child. Last month, the president said a one-time payment of $5,000 for a new baby “sounds like a good idea to me.” But Trump gave more priority during the campaign to proposals geared toward working-class voters in swing states, such as removing taxes from tips, overtime, and Social Security. “To those hotel workers and people who get tips, you are going to be very happy, because when I get to office we are going to not charge taxes on tips, people making tips. … We’re going to do that right away, first thing in office,” he said at the Nevada rally in June where he announced the tax-free tips policy.

The stakes were high for each side. The reconciliation bill represents much of Trump’s agenda, and just how much signature legislation the president will attempt to push through the 119th Congress is unclear given his reliance on executive power thus far.

Ultimately, the populist priorities won out, with tax deductions for tips and overtime, and a write-off for senior citizens—meant to fulfill Trump’s pledge of no tax on Social Security—being included. 

Baby bonuses, however, were not. While one part of the bill has been heralded as a type of baby bonus, it’s not the same thing. Republicans included a provision that would create what were originally called Money Accounts for Growth and Advancement, or MAGA accounts, for children born between the the beginning of 2025 and the beginning of 2029. Renamed “Trump Accounts” in the version the House passed, they would provide $1,000 to parents who could then invest the money in the stock market and further contribute up to $5,000 a year. Their child could use the value the fund accrued to pay for college, buy a home, or start a business upon turning 18. A true baby bonus is meant to provide immediate relief to parents to help them deal with the initial expenses that come with an infant. The House bill would delay that financial assistance for nearly two decades.

“Giving somebody a little bit of a nest egg and locking it up until they turn 18 doesn’t actually do anything to help parents who are trying to put food on the table that day or that week or that month,” Brown said.

He added that giving families even $1,000 immediately would “make a big difference” in helping them deal with the cost of a new birth. Instead, the Trump accounts are “a little bit of a flashy kind of way of trying to show that they’re concerned about parents and family affordability.”

But some back-of-the-envelope math shows how the House bill prioritizes more populist proposals over family policy. The Committee for a Responsible Federal Budget projects that eliminating taxes on tips would cost about $12 billion annually over 10 years. A $5,000 baby bonus for each of the over 3.6 million babies born in 2024 would have cost $18.1 billion—a good bit more than the current taxless tip proposal. But lower the baby bonus to $4,000 per infant and you get a more comparable sum of $14.5 billion. A $3,000 baby bonus would cost $10.8 billion.

Pro-family advocates are likely to get some wins in the bill, notably an increase in the child tax credit (CTC) to $2,500. That is not exactly an innovation that signals a change in conservatives’ thinking on social policy, however. Republicans introduced a $500 CTC in 1997 before doubling it to $1,000 in 2001. The 2017 Tax Cuts and Jobs Act further raised it to $2,000. (Democrats increased it to $3,600 in President Joe Biden’s 2021 American Rescue Plan Act, but only for one year.) Making the CTC $2,500 just helps keep up with inflation since the first Trump administration.

Beyond the CTC, there are a few other items that make social conservatives happy. The bill would prohibit Medicaid payments to clinics that perform abortions (outside of the cases of rape, incest, and threats to the life of the mother), effectively defunding Planned Parenthood, something that Republicans have tried to do for years. There are also other provisions, such as an expanded tax deduction for businesses that give their employees child care benefits, as well as a tax credit for people who donate to educational scholarships.

But family policy advocates also have a complaint about the bill’s failure to correct a marriage penalty that exists in the tax code. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples, doubled to avoid a person paying more taxes once he or she marries. However, there is also a standard deduction for a head of household. Single parents with dependents often take advantage of this tax break, which sits at $22,500. An unmarried couple filing individual returns would have deductions totalling $37,500 but that would drop to $30,000 if they wed.

“You could imagine situations where a single parent marries their partner if they’ve been unmarried, and what ends up happening is the size of their total standard deduction, if they’re unmarried, is larger than if they are married. What this does is lead to a higher tax burden if you end up getting married,” Josh McCabe, director of social policy at the Niskanen Center, told TMD. He added that one way to eliminate this marriage penalty could be to increase the standard deduction for single and married filers but not for heads of household. Instead, the bill would increase the deductions across the board until 2028—an increase of $1,000 for single people, $1,500 for heads of household, and $2,000 for married couples.

The Senate will have its say in the final version of the legislation, and it remains unclear whether it will eliminate the marriage penalty or include further family financial support. But senators would need to balance those provisions with the populist priorities that Trump campaigned on.

Whatever passes the Senate must also get through House Speaker Mike Johnson’s unruly majority. He is encouraging the upper body to make minimal changes, but Trump has given senators the green light to alter it.

“I want the Senate and the senators to make the changes they want,” Trump said Sunday. “It will go back to the House and we’ll see if we can get them. In some cases, those changes may be something I’d agree with, to be honest. … I think they are going to have changes. Some will be minor, some will be fairly significant.”

• Writing in Foreign Affairs, Victor Cha observes that “the Trump administration has paid little attention to North Korea even as the rogue dictatorship has grown stronger and more provocative. Just this year, North Korean leader Kim Jong Un has conducted nine missile tests, stolen $1.5 billion in cryptocurrency, sent more troops to support Russia’s brutal war of aggression in Ukraine, and unveiled his military’s largest modern missile destroyer, a 5,000-ton warship equipped with state-of-the-art armament.” These actions should not be ignored, Cha argues. “Leaving North Korea to its own devices will not end well. Left unchallenged, the country could perform more nuclear tests; strengthen its ties with China, Iran, and Russia; and build more advanced weapons that could credibly threaten the U.S. homeland. The Trump administration needs to restart dialogue with North Korea to arrest these developments,” he writes. “The international community’s failure to stop North Korea’s arms proliferation since the last attempt at an agreement collapsed in 2009 has allowed Pyongyang to acquire a modern arsenal of this size and scope. Kim has more cards and more leverage than ever before.”
• In the Washington Post, Andrew Jeong and Brian Murphy reflect on Harrison Ruffin Tyler, 10th President John Tyler’s grandson who died earlier this week at age 94. “‘My grandfather was born in 1790,’ Mr. Tyler said in a 2012 CBS interview. ‘My father was born in 1853. And I was born in 1928.’” However, being the grandson of a former president didn’t spare him from hard times. “During the Great Depression, Harrison’s family struggled. He woke up early to chop wood for fires to heat the home, and clothing was made from burlap sacks.” Later in life, Tyler worked to preserve American history. “In 1996, Mr. Tyler purchased Fort Pocahontas, less than two miles from Sherwood Forest, and it later served as the grounds for Civil War reenactments. The fort was the site of the first major clash between Black Union troops and those serving under Confederate Gen. Robert E. Lee in 1864, according to the fort’s website. The site ‘remained virtually untouched’ for more than a century after it was abandoned in 1865, until Mr. Tyler purchased and restored it.”

NOTUS: The MAHA Report Cites Studies That Don’t Exist

Health Secretary Robert F. Kennedy Jr. says his “Make America Healthy Again” Commission report harnesses “gold-standard” science, citing more than 500 studies and other sources to back up its claims. Those citations, though, are rife with errors, from broken links to misstated conclusions.

Seven of the cited sources don’t appear to exist at all.

Washington Post: Russia’s Deadly Drone Industry Upgraded With Iran’s Help, Report Says

“The switch from UAV imports to localized UAV manufacturing has played a significant role in supporting Russia’s war in Ukraine,” the report said. The deal allowed Russia to build Iran’s Shahed-136 drone, a propeller-driven craft that flies hundreds of miles and crashes into a target carrying 118 pounds of explosives. Russia rechristened it the Geran-2.

Axios: GOP Bill Would Force D.C. To Call Its Metro the “Trump Train”

Benny Goodman, the clarinetist who became so popular in the big band music genre that he was dubbed the “King of Swing,” would have turned 116 years old today. 

Goodman’s rendition of “Sing, Sing, Sing (With A Sing),” written by fellow swing legend Louis Prima, in 1982 earned an induction into the Grammy Hall of Fame. The instrumental lineup for that recording is stacked—Goodman is joined by Harry James on the trumpet and Gene Krupa on drums, both of whom would later become household names themselves. 

What changes would you like to see the Senate make to the reconciliation bill?