In the early hours of May 23, 2025, the U.S. House of Representatives narrowly passed a sweeping tax and spending bill dubbed the “Big Beautiful Bill Act”, a centerpiece of former President Donald Trump’s second-term economic agenda. The legislation passed with a razor-thin 215-214 vote, highlighting deep divisions within the Republican Party and signaling a major legislative challenge as the bill now heads to the Senate.
The bill bundles together massive tax reforms, spending cuts, border security funding, and a series of socially and economically impactful provisions. Among the most contentious is a 3.5% remittance tax, adjusted from an initially proposed 5%, which would apply to foreign residents sending money to other countries—particularly impacting migrant communities in the U.S.
ALSO READ. What is the remittance tax and what are its consequences?
What does the Big Beautiful Bill say about taxes on overtime and tips?
One of the most widely discussed components of the Big Beautiful Bill Act is its “no tax on overtime” provision, which exempts overtime wages and tips from federal income tax. This proposal, enthusiastically supported by Trump, is being marketed as relief for working-class Americans.
When does no tax on overtime start?
According to the current version of the bill, the no taxes on overtime wages would go into effect starting January 1, 2026, pending Senate approval. The plan is intended to encourage more labor participation and increase take-home pay for hourly workers, a move that Trump argues is essential to counter rising living costs.
What is the 3.5% remittance tax and who does it affect?
Another headline-making aspect of the bill is the remittance tax, a 3.5% levy on money transfers made by foreign residents to recipients outside the U.S. Originally proposed at 5%, the rate was lowered during last-minute negotiations with conservative lawmakers.
This provision is aimed primarily at undocumented immigrants and foreign workers, many of whom send money to their families abroad. Mexico, which receives nearly $65 billion in annual remittances from the U.S., would be among the hardest hit. Mexican President Claudia Sheinbaum denounced the tax as “an injustice” and a “discriminatory act” that punishes migrant workers.
What else is included in Trump’s economic package?
The bill is a political behemoth—spanning over 1,100 pages—and touches nearly every aspect of federal taxation and spending. Key highlights include:
- Permanent extension of Trump-era tax cuts from 2017.
- New tax exemptions for tips and overtime pay.
- Repeal of tax credits for clean energy projects (solar, wind, battery storage) by 2028.
- $12 billion in reimbursement to states for border enforcement activities since 2021.
- A hard cap of $40,000 on SALT deductions (state and local taxes).
- Repeal of firearm silencer taxes.
- Increased work requirements for Medicaid, starting in December 2026.
- Rollbacks of food assistance programs like SNAP and Medicare cuts projected to reach $500 billion over the next decade.
How much will the Big Beautiful Bill cost?
According to the nonpartisan Congressional Budget Office (CBO), the package is expected to add $2.4 trillion to the national debt over the next 10 years. The national debt currently exceeds $36 trillion. To offset these costs, the bill includes $1 trillion in cuts to social safety net programs.
Opposition from House Democrats and moderate Republicans stems largely from the social impact of these cuts. An estimated 8.7 million Americans could lose Medicaid coverage, and millions more could face reductions in food and housing assistance.
Will the overtime tax bill and remittance tax become law?
Not yet. The bill now moves to the U.S. Senate, where Republicans hold a slim 53-47 majority. The legislation is being advanced under budget reconciliation rules, allowing it to bypass a Senate filibuster with a simple majority vote instead of 60.
However, further amendments are expected. Moderate Republicans are raising concerns about the cuts to healthcare and food assistance, while conservatives demand more aggressive budget reductions.
Trump has made it clear he wants the bill on his desk before July 4, viewing it as a symbolic moment to celebrate a second-term victory. The outcome in the Senate will determine whether provisions like no tax on overtime, the remittance tax, and sweeping Medicaid changes become law.
Why is the bill so polarizing?
Supporters argue the bill provides targeted tax relief, boosts economic growth, and ensures that non-citizens contribute to the cost of government services. Trump called the passage in the House “historic” and thanked every Republican who voted yes.
Critics, however, call it a “GOP tax scam” that benefits the wealthy at the expense of working families.
