Kendall Jones-Neukomm (00:00)

Hi everyone. Welcome to Whitley Penn Talks, where we give you valuable insights to help you make confident, informed decisions and move your business forward. My name is Kendall Jones-Neukomm, and today we are talking about the One Big Beautiful Bill.

Joining me today are John Karp and Kristin Sayegh, both tax partners here at Whitley Penn. And we’re so happy to get into this conversation today. So welcome, John. Welcome, Kristin. I’ll let you two introduce yourselves before we get started.

Jon Karp (00:35)
So I’m Jon Karp, I’m a tax partner in the Dallas office. I’ve been doing taxes for a little over 20, well, well over 25 years. And we have clients that are all over the country and actually all over the world that we represent on US tax issues and then state and local tax issues.

Kristen Sayegh (00:53)
Yeah, absolutely. Kendall, thank you for having us. My name is Kristen Sayegh. I’m a Tax partner in our Houston office. ⁓ Similar to Jon, you know, a wide variety of tax clients that we service here and excited to be on the podcast today. Thanks for having us.

Kendall Jones-Neukomm (00:53

Jon, thank you so much for introducing yourselves. I know both of you have participated in our tax seminars in the past, and I’m excited to chat with both of you today and learn a little bit more about what this big, beautiful bill entails and where we currently stand. So let’s get into it.

Jon, we’ll actually start with you to kick us off. Can you start by giving us just a high level overview on what the bill entails today?

Jon Karp (01:30)
Sure, sure. And I think the idea is behind, like when we talked about in the 2024 tax update, we actually talked about all these tax attributes and tax provisions expiring at the end of 2025. And so now what this big, beautiful tax bill, this sweeping legislative initiative that President Trump has is trying to keep a lot of what was expiring at the end of 2025 permanent or extending it beyond the 2025 year and going into 2026. And what it includes is some major tax reforms, some significant spending cuts, some policy shifts that are across the healthcare arena, defense and social programs, which we, and by the way, when we talk about social programs, we’re really talking about what we consider entitlement programs.

And then it builds in the Senate bill builds upon the House bill, but it introduces changes that are aimed at making the bill a little more palatable to some of the moderate Republicans because it’s pretty much going to be a bi- it’s not going to be a bipartisan bill. It’ll probably pass probably right along party lines if it passes. And so the moderate Republicans and the fiscal conservative senators are just trying to moderate this bill so that they can get that over the threshold to get enough votes. And then there’s some other key elements that will be included in there. Some permanent business tax incentives, a restructured child tax credit and some deep cuts to the Medicaid and SNAP programs, which are the food assistance programs that we have.

Kendall Jones-Neukomm (03:05)
Awesome, thanks for outlining that for us. And Kristen, to go to you next, so what are some of the key differences between the Senate’s version of the House and the House’s version of this bill?

Kristen Sayegh (03:17)
Right. So we’re getting to really remember Schoolhouse Rocks and if I was a bill watching this go how it’s going to go back and forth. But ⁓ you know, there are some differences that the Senate has already kicked back to the House. ⁓ The SALT deduction. SALT is state and local tax deduction. And that would be your income tax, your property taxes or your sales tax that you pay in a state.

And right now, as it currently sits, all of those combined for an individual are capped at $10,000 a person if you itemize. The House had a proposal that would raise that cap to $40,000 if you earned less than $500,000. So we had a lot of clients that were really excited about $40,000 deduction, but there are going to be income limitations if it were to pass in the House version.

However, the Senate has already ⁓ changed that and kicked back to the House one that ⁓ changes the cap back down to $10,000. So this is a major point of concern. We’ll talk about it more in a minute, but that’s one of the differences. The ⁓ allowance for some of the entitlement programs that John mentioned, the SNAP program, ⁓ the Senate proposal softens the House’s ⁓ requirements from the states to get that money and ⁓ it adjusts the work requirements ⁓

for SNAP programs. Child tax credit is another one. ⁓ This affects some people, not a ton of our clients, but the child tax credit, the Senate version proposes a smaller increase to that. aiming for more fiscally conservative approach out of the Senate by having a smaller increase. And then finally, we see Medicaid cuts. The Senate version cuts that even more aggressively than what the House sent to them.

Kendall Jones-Neukomm (05:10)
Got it. Thank you for sharing that. And I know, Jon, when we were prepping, we talked through issues related to a couple of these notable differences that Kristin just outlined for us. So for, let’s start with the salt deduction cap. So what’s some of the, or one of the key issues there that you see with that change or difference?

Jon Karp (05:11)
So the key difference between the House and the Senate is the House has representatives that are in what we call the Republican House members, right? So they’re congressional leaders, Republican, but in blue states. The Senate has no blue state senators. So when you’re looking at making policies and tax policy, they’re not as concerned about reelection because they don’t have to worry about their districts getting reelected if they pass the lower SALT cap, which is the $10,000. So, like Representative Mike Lawler out of New York has said, it is dead on arrival. Like you, like we’re not gonna let this pass if you keep 10,000. And of course the Senate has said, well, we’re only putting it in there as a placeholder. Like, you know, we think it might change. And what’s really interesting is that it’s all semantics, that at the end of the day, it’s not that there’s gonna be a limitation, it’s just.

Is it going to be between 10 and 40 or it will be 40? And if you think about the makeup of the House and the Senate, they really can’t afford to lose that many votes. So it’ll be interesting to see how this plays out in the, as we watch this play out to hopefully they’re going to try and get this done right by the holiday coming up. So July 4th. So we’ll, we’ll see, who knows, but it’s going to be very tricky. The other part of that salt cap, which is kind of the quiet business side of it is the pass through entity tax selection, that they’re trying to limit that and they’re tying that to the qualified business income tax deduction. And how they’re doing that is totally different in the House and the Senate. And so there’s gonna be some limitation there and some capping of that PTET deduction. 

Kendall Jones-Neukomm(07:01)
Yeah. And then I was going to say, and then we also talked a little bit about Medicaid cuts and additional issues there. do you want to break that down a little bit more for us?

Jon Karp (07:23)
Well, sure. So when you think about, and this is even like a senator who, you you would probably say he’s a pretty conservative senator. Josh Hawley, he is really worried about this because in his constituents in Missouri, they use a lot of Medicaid. And when you’re looking at the rural communities, those rural communities are going to have a problem if Medicaid goes away. Like hospitals might close. Well, they really don’t know what’s going to happen, but it’s going to be a problem. Like they’re looking at how that’s going to relate. So Josh Hawley is really upset about the Medicaid issue.

And so here you have different issues, right? A senator and someone who’s in the House, both Republicans are saying, wait a minute, we’ve got to figure this problem out here between the two Houses of Congress.

Kendall Jones-Neukomm(08:08)
Yeah, definitely. So they have to have to represent who they represent a little bit there.

So Jon, we’ll stay with you for one more question here and then Kristen back to you in just a minute. But Jon, how do these changes impact both businesses and individuals ⁓ and what do you see happening there?

Jon Karp (08:25)
For businesses, the Senate version is largely favorable. It makes permanent several tax incentives. So including the full expensing of capital investments. And what we’ve all been waiting for was some sort of permanency with the R &D tax credits. the government, Congress has been messing with this for a long time and that no one’s made it permanent. We’re always like, it going to come back? What’s going to happen?

And when you take the capital investments in the R &D credit combined, it’s going to stimulate some growth and investment in our economy. For individuals, I think the picture’s a little more mixed. That some middle income families may benefit from some modest tax relief. Others, especially in high tax rates, could see higher tax bills possibly due to the lowered salt cap. And then cuts to Medicaid and SNAP could really disproportionately affect low income households.

Kendall Jones-Neukomm(09:22)
Yeah, for sure. Kristen, anything to add there before we move on?

Kristen Sayegh (09:27)
I mean, we’ll say it a lot at the end, but again, this is just so not finalized. So I’ve had some clients already reach out and like, okay, the R &D deductions back. And I’m like, let’s not go to bed with that yet. ⁓ we will continue to listen and I think we’re gonna see so many changes just with the Senate bill going back to the house. And as Jon mentioned, you know, it really does show when you now have a representative that’s maybe able to Republican from a blue state and they’re they got elected. They got enough votes to be elected, but they’ve got a large group of people back home that are threatening to not reelect them unless they hold some of those, you know, more blue state values. ⁓ So it’ll be interesting.

Kendall Jones-Neukomm(10:18)
Kristin, staying with you for our next question, wasn’t some of the criticism of the House bill that it cut Medicaid and raised the debt ceiling, and why haven’t we heard about this with the Senate bill so far?

Kristen Sayegh (10:29)
Yes, this was actually when ⁓ I got a chance to read the Senate bill, I was like, what am I missing here? Because they seem to have gone further in the areas that we’ve heard the media and news sources be all over criticizing the House bill. The Senate bill actually goes further on the cuts to Medicaid and they’ve further increased the debt ceiling, which a ton of criticism in the last you know, two weeks against the House bill has been had there. And ⁓ actually, you know, went to chat GPT to try to get some understanding because I didn’t understand, I thought I was missing something in the bill. And, ⁓ you know, that along with some other reading, it’s a classic case of perception versus policy. The House bill was the first one to pass. So it took the initial fire from the Democrats, from media, from health care groups for slashing Medicaid and boosting the debt limit.

By the time the Senate version arrived, it’s almost like we expected it. The House took the blow at first, and then we like knew that we needed to have these adjustments and that they would most likely be in the Senate bill. ⁓ So it was already assumed and it was about negotiating the size, not the existence of these two things. ⁓ Also messaging matters. ⁓ The House marketed their bill as fiscally responsible.

And then to come out and increase the debt by $4 trillion, nobody thinks that that’s being fiscally responsible. Whereas when the Senate pushed out theirs, they said that they were balancing cuts with concessions. And so they kind of said, like, look, you’re going to see some things in here you don’t like, but it’s because we’re including things you will like. And so ⁓ for any marketing majors out there, that’s maybe going to be a case study there.

And then there’s just more house swing districts as we’ve already talked about a few times. So there’s just more chance for House members to get exposed politically. If you’re in a blue state and you’re a blue person and you have a red House member, you’re going to be posting all over anywhere that you can that you’re upset with what they’re trying to pass. Whereas the Senate doesn’t have that as strongly.

Kendall Jones-Neukomm (12:43)
Yeah.

Yeah, that’s a good point. That’s like the anchoring effect. when the House bill came out, we all just anchored on the facts there. And then when the Senate version came out, ⁓ was kind of expected at that point in some aspects. Thank you for explaining that. Jon, anything to add there?

Jon Karp (13:04)
I think at the end of the day, it’s really going to be some of these swing districts. You know what? I really shouldn’t say that. It’s really going to also be like you’ve got Josh Hawley in Missouri, any rural senator could also be paying attention to their Medicaid budgets and how that’s going to affect their constituents in terms of how deep those cuts go. And I think we’ll see something is just how much.

Kendall Jones-Neukomm (13:28)
And Jon for our next question. On that note, any thoughts on what listeners should should really keep an eye on as this bill continues to progress?

Jon Karp (13:39)
You know, I think that Senate negotiations over the salt and the Medicaid, which we kind of have talked a lot about that, because I think those are the two critical issues that it’s going to drive whether this bill gets passed or not. I think your holdouts are going to be your salt holdouts and your Medicaid holdouts. And it could be that it’s going to be the red, it’s going to be Republican holdouts. It’s not going to be, the Democrats are going to hold out regardless. They’re going to all vote no anyway. It’s probably most likely, like I’m convinced this will be right along party lines.

And so the question is which Republicans are going say, wait, we’ve got to change this. And we may never know, right? There may be some straw polling first and they’re going to come to consensus. And then it’s going to be how it’s going to moderate in both chambers and respond to that financial reconciliation version so that they don’t have to impart of the reconciliation process, which is why when we talk about it passing on long party lines is they only have to have 50 % if they keep it in reconciliation versus this 60 % voting in the Senate. So they really want to keep this within that reconciliation process. And then, you know, President Trump is determined that this will pass by July 4th. And so the question will be whether or not that gets met, right? Or if the delays push the bill into some further debate. I know they would really, they really want to have this delivered and they keep talking that they’ll have something delivered, but we’ll just see.

Kendall Jones-Neukomm (14:38)

Right. And just for those listening, talk a little bit more about the reconciliation versus the vote. are the requirements there? And mainly for my own curiosity, too.

Jon Karp (15:18)
Well, on a reconciliation act, it has to be budgetary in nature. because of the way it works, it limits debate in the chambers. And then it also, and we could have a whole podcast on this, but maybe we’ll do that at a later part two or part three. But again, then it only requires 50 % to just pass and to become a tax law.

But again, it’s got to be budgetary. In fact, what I’ve said a couple of times is that the true person, and depending on how they score this bill, the true person that holds the keys to the kingdom is going to be the Senate Parliamentarian about what can be in the bill and what can’t be in the bill, and what’s budgetary and what’s not budgetary. And she’s ruled on some things and not on others that I’ve seen. So it’ll be interesting to see how that really falls through when the final version comes out.

Kendall Jones (16:09)
Yeah. And then versus if they were to go to a vote, 60 % would be required, correct? Right. Yeah, yeah. Exactly. It’s going to be close as is at 50. Yeah. So, Jon, next question there. Do you feel like the deal is done?

Jon Karp (16:14)

I do not think the deal is done.

I mean, I think if it were to go to a vote today, I’m not sure if it would pass. I do think that the deal will get done. And I think a deal has to get done. Remember, we’re looking at tax policies that are all expiring. And there’s some other, like we didn’t even talk about the estate tax and what’s in there for estate taxes. And that’s, again, a whole other podcast. But the idea is that there’s a lot in the bill and there’s a lot of expiring provisions that we need to advise clients and then I think congressional leaders, even though they’re bickering about certain aspects between the House and the Senate, I think they understand that we need it. Like we need some provisions and we need that certainty to go forward. And I think we don’t deal, the American population doesn’t deal with uncertainty well.

So I’d say most people in general, ⁓ but yeah, good point. So Kristen, to wrap us up and before we close out this episode today, what’s next?

Kristen Sayegh (17:26)
Yeah, I think we just all get to really feel comfortable. We can go home at night and turn on whatever TV program and this is gonna be discussed on there. If it’s over by July 4th, I think that’ll be incredible. ⁓ Hopefully it’s all good things within the bill. I hope they don’t rush it, know, to get, you know, just to meet the requirement that Trump has given them to have it done by July 4th. Because there’s implications to this, you know, our clients feel it, the businesses we work with, ⁓ there’s true implications to this. And we can kind of get somewhat ⁓ black and white and factual about this is the tax law, but at the end of the day, it’s affecting someone’s business, it’s affecting someone’s family. So I do hope they continue to have consideration as they’re trying to figure this out.

But ultimately, it’s a case of intra-party tension. If you think about when you go home and ask your kids, what do they want for dinner? And one’s saying pizza and one’s saying hamburgers and one’s saying, I’m not hungry. That is what’s going on inside the parties. The Republicans do control both chambers, narrowly. And so they’re really having to ⁓ watch that. ⁓ you know, with the 2020, also we have the 2026 midterms. We’re recording this, you know, June 19th, 2026. Midterms are already on the horizon. And so some of those congressmen are going to be already looking for what kind of vote can they win. ⁓ So they’re walking the tightrope between party loyalty and constituent demands and wanting to get this done. frankly, many of them probably not even really understanding what they’re talking about.

Some of these tax concepts are so complicated that they don’t really truly understand ⁓ what they’re trying to negotiate here. So we will all be watching closely. It keeps me and John doing podcasts and presentations, which is fun, but certainty I think would be good sooner rather than later for everybody for us as professionals that advise clients for our clients and their businesses for any individual in the US like we need some certainty. Hopefully it comes soon.

Kendall Jones-Neukomm(19:20)
Mm-hmm.

Yeah, definitely agreed. Well, Jon, Kristin, thank you both so much for your time. This has been extremely helpful to chat through where we currently stand with this bill. And I’ll close this out. But for those listening, if you enjoyed today’s episode, be sure to subscribe on YouTube, Spotify, Apple, or listen right on our website at WhitleyPenn.com slash podcast.

If you’re interested in receiving tax alerts and further tax insights, additional podcasts, attending future events, definitely check out that link in the description to sign up for our email list. Thank you again for both of your time, as I previously said, and we’re looking forward to more. ⁓ thanks guys.

Jon Karp (20:23)
Thanks.

Kristen Sayegh (20:24)
Thanks, Kendall.