House Passes Trump-Backed Budget Bill, Setting Stage for Tax Cuts

The U.S. House of Representatives has passed a budget resolution, a significant step towards President Donald Trump's sweeping domestic policy agenda. The vote, which went almost entirely along party lines, 217-215, paves the way for the "big, beautiful bill" that Trump and House Speaker Mike Johnson have been championing. This bill includes border security, tax, and energy provisions that the president campaigned on.



The resolution, which will also need to pass the Senate to move forward, lays out instructions to various House committees to come up with specific tax and spending cuts. At least $1.5 trillion in spending cuts would help pay for some of it, but the plan would most likely add trillions to deficits over the next decade.

The budget bill's passage sets the stage for the extension of Trump's tax cuts, which mostly benefited businesses and the wealthy during his first term. Investors fully expect these tax cuts to be fully extended before the end of the year, as not doing so would impose, effectively, a tax increase.

However, the arithmetic remains tenuous. The cost of extending the tax cuts may total $4 trillion over 10 years. This means Congress is being left to barter over what else can save or raise money, and whose federal benefits might be cut. Reductions in the corporate tax rate have historically led to above-average returns in the S&P 500, but the long-term consequences on federal revenue, government debt, and economic growth could have a negative impact on the stock market.



In conclusion, the House's passage of the Trump-backed budget bill is a significant step towards the extension of the president's tax cuts. While investors expect these tax cuts to have a positive impact on the stock market, the long-term consequences on federal revenue, government debt, and economic growth could have a negative impact on the market. As investors, it is essential to consider these potential consequences when evaluating the impact of a lower corporate tax rate on their portfolios.