The U.S. Congress passed a massive tax reform spending bill, and encryption investors need to follow policy changes.

According to a report by Bloomberg, after several days of negotiations and last-minute gamesmanship, the U.S. Congress passed a multi-trillion-dollar tax and spending bill that solidifies President Trump's domestic policy agenda.

This bill, referred to by Trump as "big and beautiful," extends the tax cut policies implemented during his first term, allocates billions of dollars for defense and immigration enforcement, while significantly cutting funding for healthcare programs, food assistance, and clean energy projects. The bill passed in the House with a vote of 218-214 and has now been submitted to President Trump for signing.

Core Changes in Tax Law: Impact on Individuals, Enterprises, and Cryptocurrency Inheritance

• **Permanent Extension of 2017 Tax Cuts: ** Permanently extending most of the personal and estate tax provisions in Trump's 2017 Tax Cuts and Jobs Act (originally set to expire at the end of 2025). This has long-term implications for tax planning for cryptocurrency holders, including:
  • Increase the standard deduction (reduce taxable income)
  • Reduce income tax rates for most taxpayers
  • Increase the Child Tax Credit
  • Private enterprise tax deductions
  • Inheritance tax exemption doubled: The amount of inheritance that individuals can leave to their heirs tax-free is doubled, and the tax burden on cryptocurrency asset inheritance is expected to be alleviated.
• New Short-term Tax Incentives (2028 Expiration ): Fulfillment of Trump's 2024 campaign promise, including tax exemptions for tips and overtime income.
• State and Local Tax Deduction Limit Increased (SALT): A compromise with Republican lawmakers from high-tax states like New York raises the federal deduction limit for state and local taxes (SALT) from $10,000 to $40,000, with the deduction phased out for those earning over $500,000, and the limit reverting to $10,000 after 5 years.
• Increase in Investment Income Tax for Private Universities: For private universities like Harvard with large endowments per student, the net investment income tax rate has increased from 1.4% to 8%.
• Cancellation of Electric Vehicle and Climate Project Tax Credits: The elimination of tax credits for electric vehicles and climate projects implemented during the Biden administration in 2022. This could lead to the disappearance of clean energy mining tax incentives, affecting the operating costs of crypto mining sites.
• New Tax Deduction for Auto Loan Interest on American-Made Cars: Increase the tax credit for auto loan interest on vehicles manufactured in the USA.

Expenditure Adjustment: Safety Net Cuts and Defense Immigration Investment

• Significant cuts to welfare programs and clean energy spending: Reducing federal spending on safety net programs and clean energy credits by more than $1 trillion.
• Medical Assistance (Medicaid) New Regulations:
  • New work requirements for low-income individuals receiving Medicaid.
• Restrict the ability of states to fund the program through taxing healthcare providers.
• The Congressional Budget Office (CBO) estimates that by 2034, approximately 11.8 million Americans may lose their health insurance as a result.
• Food Assistance (SNAP) New Regulations:
• New work requirements for the food assistance program SNAP for low-income families.
• Require states to bear a larger proportion of project costs.
• To gain the support of Alaska Senator Murkowski, the bill includes certain exemption provisions for Alaska and Hawaii.
• CBO estimates that expanded work requirements will reduce the number of SNAP participants by about 3.2 million.
• Defense and Border Investments Surge:
  • Increase military spending and immigration enforcement funding.
  • Allocated nearly $47 billion for the construction of the US-Mexico border wall.
• Allocated $45 billion for detention centers.
• Increase Debt Ceiling: Raise the debt ceiling by $500 billion, allowing the Treasury to borrow to meet federal spending obligations.

Legislative Process: Budget Coordination Procedures and Accounting Techniques Cause Controversy

• Adopting the Budget Reconciliation Process: The Republicans use this process to bypass the usual 60-vote supermajority threshold required in the Senate, allowing them to pass legislation with a simple majority (51 votes).
• Difficult negotiations and slight advantages passed: The bill faced enormous resistance in both chambers of Congress, with Republican leaders engaging in lengthy negotiations with key lawmakers. Conservatives want a more radical solution to the debt problem, while moderates oppose cuts to the safety net. The House initially passed the bill in May by a narrow margin of 215-214. The Senate passed the amendment on July 1 with a vote of 51-50, with Vice President Vance casting the crucial tie-breaking vote. Two days later, the House passed the Senate's revised version, with two Republican lawmakers joining all Democratic lawmakers in voting against it.
• Unconventional accounting practices raise questions:
  • The Republican Party uses the "current policy baseline" instead of the CBO's conventional "current law baseline" to calculate the impact of the bill on the deficit.
  • Under the "current legal benchmark", extending the 2017 tax cut policy will increase costs by approximately $3.8 trillion.
  • "Current Policy Benchmark" accounting treatment: This method assumes that the tax reduction policy will continue indefinitely, thus being treated as "zero cost" on the books. This allows the Republicans to include more tax benefits in the bill, circumventing the usual rules limiting the fiscal impact of budget reconciliation.
• Economists warn that this practice sets a dangerous precedent for future legislators to extend costly provisions using similar methods, the issues of the U.S. fiscal deficit and national debt are exacerbated, and by any calculation, the bill will increase the national debt by trillions of dollars.

Controversy over Bill Cost Estimates and Economic Impact

• CBO Estimate (Current Law Baseline): The bill is expected to increase the federal deficit by $3.4 trillion over the next ten years.
• Estimates under the baseline requested by the Republican Party (current policy baseline): The bill is projected to save $400 billion over ten years (this estimate does not account for the economic impact of the bill).
• Government Optimism: The Trump administration claims that economic growth from tax cuts and deregulation, along with tariff revenues, will offset costs. The White House Council of Economic Advisers predicts that tax cuts will lead to a 4.2% to 5.2% increase in inflation-adjusted GDP over four years.
• Economists are concerned: Many economists believe that government forecasts are overly optimistic. The cost of the bill has heightened investors' and economists' concerns about the future borrowing levels in the U.S. It is expected that by 2035, the U.S. debt-to-GDP ratio will exceed 118%, which could undermine confidence in U.S. Treasuries and dollar assets, thereby affecting the appeal of cryptocurrencies as alternative assets.

Can Trump's tariff plan fill the tax cut gap? The correlation with the crypto market remains to be seen

• Significant Differences in Government Estimates: White House trade advisor Navarro claims that tariffs could generate $6-7 trillion over ten years; Treasury Secretary Mnuchin states that they could bring in $300-600 billion annually.
• Economists generally pessimistic:
• Most economists expect that tariff revenues will be far lower than the fiscal revenue losses caused by the tax law (approximately $3.4 trillion over ten years). Consumers will reduce purchases due to rising prices, leading to a decline in imports and ultimately resulting in decreased tariff revenue.
  • After considering the retaliation from other countries and the impact on consumers, major independent institutions estimate the ten-year tariff revenue:
    • CBO (based on May 13 tariffs): $2.8 trillion (by 2035).
    • Tax Foundation: approximately $1.4 trillion.
    • Yale Budget Lab: $2 trillion.
  • These estimates do not include revenue that could be generated from Trump forcing trade partners to make concessions through tariffs.
• Potential Impact on the Cryptocurrency Market: Trade tensions caused by tariffs, inflationary pressures, and fluctuations in the US dollar exchange rate may increase the demand for cryptocurrencies as a safe haven or hedging tool, but the actual effects are influenced by multiple factors.

Key Takeaways: Crypto users need to pay close attention This bill has potential impacts on the cryptocurrency tax environment (especially estate tax), energy costs of crypto mining (removal of clean energy subsidies), and the macroeconomic and fiscal health of the United States (affecting the stability of the dollar and traditional financial markets). Bitcoin tax optimization strategies and the tax burden on blockchain enterprises may benefit from permanent tax reduction provisions, but the overall increase in fiscal risk is a cause for concern.