Government Affairs Roundup for 7.9.25

Chamber members:

Congressional Republicans have finally delivered their “big, beautiful bill,” but now face two urgent priorities: enacting billions in spending cuts and preventing a government shutdown.

The Senate is expected to vote next on a $9.4 billion rescission proposal, which targets previously approved funding for NPR, PBS, and foreign aid. The clock is ticking—lawmakers must act by July 18 or the administration will be required to spend the money as originally authorized by Congress.

Meanwhile, the Senate will begin marking up its first batch of government funding bills, aiming to avoid a shutdown when the fiscal year ends on September 30. Leadership is under pressure to avoid a massive omnibus package and instead pass individual spending measures. However, the upcoming August recess threatens to consume four critical weeks of negotiation time.

On the House side, progress is slow but steady. Lawmakers have passed one appropriations bill and advanced four others through committee. House Appropriations Chair Tom Cole aims to complete all 12 markups by July 30. Still, even the traditionally bipartisan VA funding bill passed with just two Democratic votes—highlighting the increasingly partisan nature of the process. That’s a risky dynamic for Republicans, who can afford to lose no more than three votes on their side for party-line bills.

President Trump Signs ‘Big, Beautiful Bill’ into Law on July Fourth
President Donald Trump signed a sweeping reconciliation package into law on Friday, finalizing a major legislative win for his administration just in time for the Fourth of July. The signing took place during a military family picnic at the White House, aligning with a self-imposed Independence Day deadline that, just days earlier, appeared to be in jeopardy.

After months of tense negotiations among Republicans on Capitol Hill, the bill cleared its final hurdle Thursday when the House narrowly approved the measure in a 218-214 vote. Two Republicans joined all Democrats in voting against it. The Senate had passed its version earlier in the week, with Vice President Vance casting the tie-breaking vote after a 50-50 split, as three Republicans voted no.

The legislation delivers on several key promises from Trump’s 2024 campaign platform. Chief among them is the extension of the 2017 Trump-era tax cuts, which were scheduled to expire later this year. It also includes the elimination of certain taxes on tipped wages and raises the cap on state and local tax (SALT) deductions, one of the most contentious issues during negotiations.

In addition to tax provisions, the bill directs $150 billion in new funding toward border wall construction, immigration enforcement, and deportation efforts. Another $150 billion will bolster defense spending, including shipbuilding initiatives and a new “Golden Dome” missile defense system.

The legislation also scales back incentives for green energy development while boosting domestic production of oil, coal, and natural gas. To avoid a looming default, it raises the federal debt ceiling by $5 trillion.

However, Democrats have sharply criticized the bill for including deep cuts to low-income health and nutrition programs—reductions aimed at offsetting the cost of the tax cuts. Critics warn the changes could result in millions of Americans losing health coverage and essential support.

Despite the backlash, the bill marks a significant policy milestone for Trump and his Republican allies, encapsulating their fiscal and political priorities heading into the 2024 election season.

How ‘Big, Beautiful Bill’ Reshapes the U.S. Tax System
At the heart of President Trump’s newly signed legislative package is a sweeping set of tax reforms that extend and expand upon the 2017 tax cuts, alongside targeted incentives for individuals, businesses, and specific industries. While the bill also touches immigration, defense, and healthcare, its central focus is taxes — and the changes are both vast and complex.

Overall Fiscal Impact
According to the Congressional Budget Office and the Joint Committee on Taxation, the Senate version of the bill would reduce the federal deficit by $500 billion over 10 years — before factoring in the cost of the core tax cuts. With the tax extensions included, the bill adds approximately $3.3 trillion to the deficit, about 9.1% of the current $36 trillion U.S. debt.
The administration expects $2.5 trillion in tariff revenue to help offset the cost, though that figure excludes debt servicing and broader macroeconomic effects.

Key Individual Tax Changes
The bill makes permanent many elements of the 2017 Tax Cuts and Jobs Act, along with new provisions aimed at working- and middle-class Americans:

• Standard Deduction: Increased by $750 for single filers and $1,500 for joint filers.
• Child Tax Credit: Increased from $2,000 to $2,200, adjusted for inflation, and limited to filers with a valid Social Security number.
• Alternative Minimum Tax: Exemption made permanent, with a faster phaseout.
• Inheritance & Gift Tax Exemption: Raised to $15 million for individuals and $30 million for couples, indexed to inflation.
• SALT Deduction Cap: Raised to $40,000 for individuals earning under $500,000, with gradual reductions beginning in 2030.

Additional Individual Provisions
These new tax breaks, targeted at specific demographics, were central to Trump’s 2024 campaign promises:

• Tipped Wages Deduction: Up to $25,000; overtime wages deductible up to $12,500, both phasing out above $150,000 income.
• Senior Deduction: An additional $6,000 for taxpayers over 65.
• Auto Loan Interest: Deductible up to $10,000, phasing out after $100,000 income; applies only to U.S.-made vehicles.
• “Trump Accounts”: Government deposits $1,000 into savings accounts for children born between 2024–2028.
• Most of these provisions expire in 2028, potentially setting up a new “tax cliff.”

Business and Corporate Tax Reforms
The bill reaffirms the 2017 corporate tax rate cut from 35% to 21%, a move that previously reduced the effective tax rate for many Fortune 500 companies to 12.8%, according to the Institute on Taxation and Economic Policy.
Other business provisions include:

• Pass-Through Deduction: Maintains a 20% deduction for business income from LLCs, S-corps, and sole proprietorships.
• Capital Investment Incentives:
  • Immediate depreciation deduction (retroactive to Trump’s term start)
  • New standards for interest deductibility
  • Full expensing for research and development
• Industry-Specific Credits:
  • Factory construction
  • Semiconductor manufacturing
  • Opportunity zones
  • Carbon capture and sequestration

International Tax Changes
In a significant shift, the U.S. has negotiated a “side-by-side” deal with G7 nations, effectively pulling out of the OECD’s global minimum tax agreement. Instead, the U.S. will rely on its own framework, preserving structures like:

• GILTI (Global Intangible Low-Taxed Income)
• FDII (Foreign-Derived Intangible Income)
• BEAT (Base Erosion and Anti-Abuse Tax)
• A domestic corporate alternative minimum tax

This move excludes Section 899 — a proposed retaliatory tax — from the final legislation, a relief to international investors.

However, some tax experts argue the U.S. is abandoning international norms while still trying to influence OECD negotiations. NYU law professor David Rosenbloom called the U.S. approach “strange” and criticized the “separate but equal” tax frameworks.

Other Notable Tax Changes

• Low-Income Housing Tax Credit: Expanded.
• Mortgage Interest Deduction: Extended.
• Moving Expense Deduction: Eliminated.
• Dependent Care Programs: Enhanced.
• Private School Tax Credit: Provides up to $1,700 for donations to groups offering tuition vouchers. Critics, including the Institute on Taxation and Economic Policy, warn of unchecked costs due to the lack of a funding cap.

Bill Brings Sweeping Changes to U.S. Health Care
While framed primarily as a tax cut and domestic policy victory, President Trump’s newly signed “One Big, Beautiful Bill” contains the most dramatic overhaul of the U.S. health care system since the Affordable Care Act (ACA) in 2010.

The legislation includes more than $1 trillion in federal health care cuts, largely to Medicaid, and is projected to cause nearly 12 million people to lose health coverage by 2034, according to the Congressional Budget Office.

Medicaid: Major Overhaul Ahead
The bill targets Medicaid recipients—especially those who gained coverage through the ACA expansion, which extended eligibility to individuals earning up to 138% of the federal poverty level.

Key policy changes include:

• Work Requirements (Starting Dec. 2026): Adults under 65 must prove they work, attend school, or volunteer at least 80 hours/month. States must verify compliance every six months, and people must prove exemptions (e.g., disability, pregnancy) through detailed documentation.
• Biannual Eligibility Checks (Starting 2027): States will need to review eligibility twice a year, increasing the likelihood of people losing coverage due to missed paperwork or income changes.
• Cost-Sharing Requirements: Those above the poverty line will pay co-pays up to 5% of their income annually, though services like primary care, mental health, and prescription drugs have exemptions or reduced charges.
• Planned Parenthood Impact: The bill bars federal Medicaid funds from going to any clinic that provides abortions. Planned Parenthood warns that nearly 200 health centers across 24 states may close, mostly in states where abortion remains legal.

ACA Marketplace Changes
The legislation also tightens access to ACA health insurance exchanges:

• Eligibility Restrictions: Premium subsidies will be limited to individuals not eligible for any other federal program and exclude most immigrants and green card holders.
• Real-Time Verification: Subsidies will only be granted after eligibility is verified, eliminating the current 90-day grace period.
• No Automatic Reenrollment (After 2027): Enrollees must manually update income and personal data each year.
• Limited Special Enrollment Subsidies: Those signing up outside of open enrollment will lose access to subsidies.

Impact on Hospitals—Especially Rural and Safety-Net Providers
The bill’s Medicaid reductions will disproportionately affect rural and low-income hospitals:

• Nearly $191 billion in cuts to Medicaid-related provider funding over a decade, including $58 billion to rural hospitals, according to the National Rural Health Association.
• A temporary $50 billion rural health relief fund was added, but hospital leaders call it a “Band-Aid.”
• Health groups warn of spikes in uncompensated care, emergency room crowding, and hospital closures.

“Widespread coverage losses plus weakened hospitals is a recipe for disaster,” said Bruce Siegel, president of America’s Essential Hospitals.

The Illinois Effect: Up to 330,000 Could Lose Coverage
According to KFF, Illinois could lose $48 billion in Medicaid funding over the next 10 years, about 20% of its projected federal Medicaid budget, one of the largest losses in the country.
Governor JB Pritzker warned that the bill could cause hundreds of thousands of Illinoisans to lose coverage, especially in rural areas. Illinois Medicaid currently covers 3.4 million residents, about a quarter of the state’s population, and pays for:

• 40% of all childbirths
• 69% of all nursing home care

The state also relies heavily on provider taxes to draw down federal matching funds—revenue that would be restricted under the bill.

“No state can cover the cost of replacing this lost federal funding,” Pritzker said. “This is shameful.”

Illinois Closes Fiscal Year with Record Revenue
Illinois ended fiscal year 2025 on June 30 with a historic revenue haul of $54 billion, surpassing the previous record and exceeding the budgeted estimate by $717 million, according to the Commission on Government Forecasting and Accountability (COGFA). Despite that strong finish, state officials warn that future financial challenges—particularly from federal policy changes—could erase any sense of long-term security.

The final revenue total closely matched projections from both COGFA and the Governor’s Office of Management and Budget made in May, which were used to build the FY26 budget. As a result, there were no major surprises in June’s collections—and no substantial surplus to carry over. Still, Gov. JB Pritzker and legislative leaders remain cautious as Congress weighs deep cuts to federal aid and social programs. Those changes, if enacted, could push more costs onto state governments.

The FY25 revenue boost was powered primarily by strong growth in personal income taxes, which rose 10% over the previous year. A major factor was a reallocation—or “true-up”—by the Department of Revenue that shifted some business-related tax payments into the personal income tax category.

Other key points:

• Corporate income taxes fell by 9.5%.
• Sales tax revenue grew by less than 1% overall, but rebounded with a 3% uptick in the second half of FY25 after a sluggish start.
• Federal revenues declined 4.6%, even when excluding one-time pandemic aid from FY24. Still, stronger-than-expected state revenue made up for

After all bills were paid, the state closed FY25 with $1.9 billion in cash left in the General Revenue Fund, according to Comptroller Susana Mendoza’s office. That extra cushion allowed Mendoza to:

• Deposit $256 million into the state’s “rainy day” fund, bringing its balance to $2.5 billion.
• Pre-pay FY26 pension contributions, a move made possible by legislative authority granted last year.

“We work hard each year to pay bills on time, build up reserves, and stress fiscal discipline—even in these uncertain times,” Mendoza said.

Illinois begins FY26 with its largest budget ever, over a $55.1 billion spending plan that relies on $55.3 billion in projected revenue. That includes $1.2 billion in new or one-time revenues, such as targeted tax increases. Still, state leaders acknowledge that congressional action—particularly from budget legislation backed by the Trump administration—could severely impact state finances. Potential changes include:

• Work requirements for Medicaid and SNAP
• Cuts to Medicaid reimbursement rates
• Elimination of clean energy tax credits

“The ability of the state to step in and mitigate the damage is somewhat limited,” Pritzker said. “Some provisions of this terrible bill in Washington don’t take effect until next year, but we may have to act in a special or veto session depending on the final outcome.”

While FY25 ended on a high note, the state’s fiscal trajectory remains uncertain. If Congress cuts support to health care, nutrition, and energy programs, Illinois may be forced to absorb billions in new costs—despite the record-setting year. As Pritzker put it: “The state of Illinois can’t cover the cost of replacing what the federal government is about to cut. No state can.”

Five New Taxes Now in Effect for Illinoisans
As the new fiscal year began on July 1, Illinois residents were hit with a series of tax hikes passed by lawmakers who described them as “smart new sources of revenue.” Here’s a breakdown of the five new or increased taxes now in effect:

1. Gas Tax
The state gas tax has increased by 1.3 cents per gallon, bringing the total to 48.3 cents per gallon.
This marks another annual inflation-based increase, a provision added in 2019 when the tax was doubled from 19 to 38 cents. The automatic hikes allow lawmakers to avoid voting on future increases. The average Illinois driver now pays an estimated $143 more per year in state gas taxes.

2. Sports Betting Tax
A new tax of 25 cents per wager has been implemented, increasing to 50 cents for sportsbooks that handle over 20 million annual bets. FanDuel and DraftKings, which exceed that volume, have announced they’ll pass the full 50-cent charge on to Illinois customers.

3. Tobacco Products Tax
The tax on non-cigarette tobacco products—including items like nicotine pouches—has increased from 36% to 45% of the wholesale price. Products designed to help people quit smoking are exempt from the increase.

4. Telecommunications Tax
Phone bills are going up, too. The telecommunications tax has increased from 7% to 8.65%.
Revenue from the increase will help fund 988, the national suicide and crisis prevention hotline.

5. Hotel Tax on Short-Term Rentals
Illinois is now applying the state’s 6% hotel tax to short-term rentals, such as those booked through Airbnb and VRBO. While Airbnb had been voluntarily collecting the tax, it is now mandatory across all platforms.

These new taxes are part of broader efforts to increase state revenue as Illinois begins fiscal year 2026.

Business Owner Survey
The University of Chicago Booth School of Business is conducting a survey to collect information from privately held/family-owned company owners and executives about the options business owners consider for the ownership transition of their business such as:

– keeping the company and having a family member succeed as the top executive
– selling the company to the non-family management team
– sell all or a portion of the company to outside investors such as a private equity fund, family office or individual investors

This information collected in this survey is confidential and for academic research only – it will be helpful in understanding the intentions and process used by private/family owned businesses to provide insights and recommendations for assisting family/privately-owned businesses with these important issues.

Please take a few minutes to complete this brief survey:  click to begin survey

Or cut and paste this link in your browser:
https://chicagobooth.az1.qualtrics.com/jfe/form/SV_beIFPtPtKGZEw74

Stay well,

Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct