Reconciliation Bill Moves the Country in the Right Direction

Taxpayers should be viewing the ongoing efforts to pass the “Big Beautiful Bill” also known as budget reconciliation with excitement as the committees wrap up their work on their sections of the bill.  On May 13, 2025, the House Committee on Ways and Means finalized its section of the reconciliation bill, setting the country on the right track by eliminating wasteful spending and burdensome tax programs while enacting policies that will encourage economic growth and let taxpayers keep more of their hard-earned money.  While the first vote to pass the bill out of the Budget Committee failed on May 16, 2025, the provisions of the Ways and Means section should not be controversial.

Among the legislation’s targets is the wasteful and unnecessary Internal Revenue Service (IRS) Direct File program.  It was created as part of the Inflation Reduction Act when the bill was signed into law in August 2022.  This program was a gross expansion of the IRS’ power by making the agency both the tax preparer and collector.  Direct File is also duplicative and unnecessary because the IRS already runs the Free File program, which allows taxpayers below a certain income level to prepare their taxes free of charge with private tax preparation companies.  Thankfully, the program is terminated and the IRS is required to launch a new private-public partnership to replace both the Direct File and Free File programs.

The Ways and Means Committee also included several pro-growth policies in their legislation, like maintaining the current tax treatment of carried interest.  Carried interest is a pro-growth provision that incentivizes risk-taking and investment and has major benefits for investors, public pension funds, and retirees.  The current tax treatment of carried interest has led to more than $5 trillion being invested in the economy by private equity, 85 percent of which was supporting small businesses.  The committee was right to maintain how carried interest is treated in the tax code, which will lead to continued investment by private equity firms.

Taxpayers would also be spared from burdensome paperwork and keep more of their money when the committee  raised the 1099-K  reporting threshold back to the original threshold of $20,000 and 200 separate transactions from the current level of $600 regardless of the number of transactions.  The bill also increases the standard deduction and keeps the top tax rate at its current level.  These provisions are wins for taxpayers who will face less complicated paperwork and continue to benefit from lower taxes.

President Donald Trump said that he wanted a “big, beautiful bill” that would extend the 2017 Tax Cuts and Jobs Act provisions and cut government spending.  The Ways and Means Committee’s portion of this bill delivers on his agenda and will lead to greater economic prosperity.