← Money Rehab with Nicole Lapin
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Nicole Lapin
This episode is brought to you by Progressive Insurance. Do you ever find yourself playing the budgeting game? Well, with the name your price tool from Progressive, you can find options that fit your budget and potentially lower your bills. Try it@progressive.com, progressive Casualty Insurance Company and affiliates. Price and coverage match limited by state law. Not available in all states. I'm Nicole Lapin, the only financial expert. You don't need a dictionary to understand it's time for some money rehab. The Middle east has been dominating the headlines, of course, and I get it. The latest in Iran belongs squarely on the proverbial front page. But while this is happening, Trump's magnum opus, his big beautiful bill, is still working its way through Congress. This is the big economic bill that President Trump is hoping to get signed by the 4th of July. The last time I checked in on this on the show, the bill had been passed in the House and it was moving to the Senate, but it needed some tweaks before it would be passed. Today I'm going to tell you about those tweaks and what would happen to your wallet if they are indeed made. In my first episode on this, I listed all the big economic changes in the bill and how they would affect you. I linked it in the show notes if you need a no frills breakdown of what's in the bill. But the Cliff notes version is that this bill would make the Trump 2017 tax cuts permanent, create savings accounts for babies born between 2025, 2028. My baby just missed it. Slash Medicaid and snap benefits, slash taxes on tips and overtime, increase salt caps, and boost border security funding. The Senate's going to vote on this bill through a backdoor type process called budget reconciliation. Budget reconciliation is this special process that lets Congress pass bills with a simple majority, meaning 51 votes in the Senate instead of the usual 60 needed to dodge a filibuster. But it only applies to bills that affect spend, spending, revenue or the federal debt limit. If lawmakers try to sneak in something unrelated, like new immigration rules or abortion policies, it gets stripped out. That's where the Senate parliamentarian comes in. They are basically the ref here. And hold on to that fun fact, because it's going to matter later. Now, Republicans, of course, have the Senate majority, so why hasn't the vote happened? At least four Senate Republicans have said they wanted the changes made before they'll vote yes, and with the math being what it is, Republicans can only afford to lose three votes. There are three big policy hang ups here and one procedural Hurdle. That might be the biggest roadblock of them all. Let's start with the policy hang ups. First, the debt. I know, I know we are all tired of hearing about the national debt. And honestly, I am tired of talking about it. Well, kind of. But we've got to give it some airtime because it sets the scene here. The US is spending nearly $1 trillion a year just on interest payments. That number projected to grow fast. Every single dollar spent on interest is a dollar not spent on education, infrastructure, or emergencies. It also weakens global confidence in the US Economy. Both parties agree the debt is a threat. That's part of why this bill was pitched as a debt reduction plan. But here is the issue. The math is not mathing. The bill slashes federal programs, but it also extends Trump's tax cuts and adds new ones. That means Trump less revenue. And it also increases spending in some areas like border security and those baby savings accounts. Those baby savings accounts, by the way, are fascinating. And I'm going to do a full episode on that tomorrow. But for now, just know the CBO says the bill as written would increase the debt. And that has some fiscal conservatives, especially in the Senate, pumping the brakes. Number two, Medicaid. The House version cut Medicaid. The Senate draft goes even further. $880 billion in cuts. Here. The idea is to shrink federal spending, but the human cost, potentially massive. Right now, 72 million Americans are on Medicaid. That's 1 in 5, and in some states, like West Virginia, 1 in 3. The latest version adds work requirements. For the first time ever, adults would have to work 80 hours a month, go to school, or do community service to keep their coverage. There are exceptions for people with disabilities and caregivers. Supporters say it will weed out fraud. But here's the thing. We have tried this before. Arkansas, 2018, same work requirement. 18,000 people lost coverage. Employment didn't go up. Medical bankruptcies did. It went to court and Arkansas dropped the policy. But here's another issue. Rural hospitals. They depend on Medicaid funding to stay open. The federal money pays for doctor's visits, lab tests, medical supplies, basic stuff here. So if you take that away, those hospitals will cut services or they will close. Number three, salt. That is state and local tax deductions. Yeah, I know this part sounds so boring, but it's become one of the most bitter fights inside the GOP. Pre2017, you could deduct all of your state and local taxes on your federal return. Return that helped people in high tax states like California, New York, New Jersey. But in 2017, President Trump capped that deduction at 10,000 bucks. And that cap expires this year. The House version of the bill raises the cap to $40,000, a tax break for the middle class. The Senate wants to keep it at ten grand. House Republicans not happy. Here's the kicker. If the Senate changes anything, the bill is going to go back to the House. Which brings us to the Byrd rule. Remember, budget reconciliation? Only stuff that directly impacts federal money can stay in this bill. Now, who decides that? Well, the Senate parliamentarian does. Her name is Elizabeth McDonough. And right now she's going through the bill line by line like a boss in what is unofficially called the bird bath. She's already stripped out items like cutting funding to the CFPB Consumer Financial Protection Bureau, shifting snap, AKA food stamps costs to the states. Why is this? Well, they don't meet the budget criteria and anything she cuts has to go through the regular process. That means 60 votes. And guess what? They won't get them until her review is done. The Senate can't drop their official version and they can't schedule a vote as of Monday night. When I'm recording this, Senate Republicans are meeting behind closed doors trying to figure out what version they can actually push through. So by the time you're hearing this, there may be some updates. Now, they're hoping to have a vote on Thursday. That July 4th deadline is looking more aspirational than realistic. But I will definitely keep you posted. And don't miss tomorrow's episode where I break down the part of the bill that sounds almost too good to be true. The Baby Savings Accounts, AKA Trump accounts, which if passed could come with a one time one thousand dollar government deposit for today's tip you can take straight to the bank. If you live in a high tax state, California, New York, New Jersey, and the salt cap stays at 10k. You could lose thousands of dollars next year. But here's a workaround. First, prepay your 2025 property taxes before December 31st. If your local government allows it, that could boost your deduction this year. Second, if you own a pass through business, talk to your accountant about ptet. That's pass through entity tax. It lets your business pay the state taxes directly, which can be fully deducted. Federally, it's definitely not one size fits all. So now is the time to run the numbers with a tax pro. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie, our researcher is Emily Holmes. Do you need some money? Rehab? And let's be honest, we all do. So email us your money questions. MoneyRehaboneyNewsNetwork to potentially have your questions answered on the show or even have a one on one intervention with me. And follow us on Instagram @moneynews and TikTok MoneyNewsNetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make. Sam.