Raphael Stevens

New tax deduction — on auto loans, tips and overtime pay, and for older Americans — wouldn’t deliver much of a financial benefit for lower earners, experts said.
These policies are part of a massive legislative package championed by President Donald Trump.

Senate Majority Leader John Thune (R-SD), flanked by Sen. John Barrasso (R-Wyoming), Sen. Mike Crapo (R-Idaho) and Sen. Lindsey Graham (R-SC), speaks to reporters after the Senate passed President Trump’s reconciliation package on July 1, 2025.
Bill Clark | Cq-roll Call, Inc. | Getty Images

Tax cuts are the centerpiece of a massive legislative package championed by President Trump and passed Tuesday by Senate Republicans.
Many new tax breaks in the bill — on auto loans, tips and overtime pay, and for older Americans — are structured as tax deductions.

How much money you save with tax deductions, which reduce your taxable income, depends on your bracket. Deductions are more valuable to higher-income households and less beneficial for lower earners, experts said.
“The most modest-income workers can’t use a tax deduction at all,” said Carl Davis, research director of the Institute on Taxation and Economic Policy, a left-leaning policy think tank.
Senate Republicans passed the legislation with the narrowest of margins on Tuesday. It now heads to the House, where its fate is uncertain.

Tax deductions in the ‘big beautiful’ bill

Luis Alvarez | Digitalvision | Getty Images

The Republican bill, originally called the One Big Beautiful Bill Act, has more than $4 trillion of net tax cuts, according to the Committee for a Responsible Federal Budget.
Among them are several new tax deductions:

Car loan interest: Households can deduct up to $10,000 of annual interest on new car loans from their taxable income;
Tips: Workers can deduct up to $25,000 of tips each year from their taxable income.
Overtime pay: Workers can deduct up to $12,500 of annual overtime pay from their taxable income. (Married couples filing a joint tax return can deduct up to $25,000.)
Senior ‘bonus’ deduction: Americans ages 65 and over can deduct up to $6,000 from their taxable income.

If enacted as drafted, these deductions would be temporary, available from 2025 through 2028. They also carry various limitations such as income restrictions.

Why tax deductions are less valuable to low earners

A tax deduction reduces the amount of income that’s subject to tax, i.e., taxable income. You can find your taxable income on line 15 of your Form 1040 individual income tax return.
While the proposed tax deductions may sound large, there are a few reasons why low earners may not see much or any benefit, experts said.
1. You need taxable income
Households need some taxable income to benefit from a deduction, said Garrett Watson, director of policy analysis at the Tax Foundation.
Low earners already get a large financial benefit from the standard deduction, Watson said.
The standard deduction is worth up to $15,000 for singles and $30,000 for married couples filing jointly in 2025. (If the bill passes as drafted, it would raise the standard deduction to $15,750 for single filers, and to $31,500 for married filing jointly.)
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To get a financial benefit from the new tax deductions for car loans, seniors, tips and overtime, a household’s taxable income would have to exceed these thresholds, experts said.
More than a third, or 37%, of tipped workers in 2022 had incomes low enough that they didn’t owe federal income tax, according to an analysis last year by the Budget Lab at Yale University.
That means a “meaningful share” of tipped workers wouldn’t benefit from a tax deduction on tips, it said.
2. Value depends on tax bracket
The relative value of tax deductions depends on a household’s tax bracket, experts said.
There are seven federal income-tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Higher-income households generally fall in a higher tax bracket — any therefore can get a bigger benefit from reducing their taxable income.

“If you’re in a somewhat higher bracket, every dollar you get to deduct is worth more to you because that dollar would have been taxed at a higher rate,” Davis said.
Let’s say two households — one in the 22% bracket and one in the 10% bracket — each deduct $1 of tipped income. The former gets a tax benefit worth 22 cents, while the latter gets one worth 10 cents, Davis said.

3. Some deductions are limited
There are other reasons why households may not be able to max out certain deductions.
For example, households would need a car loan of roughly $112,000 or more to generate $10,000 of annual interest on a typical six-year loan, Jonathan Smoke, chief economist at Cox Automotive, an auto market research firm, told CNBC last month.
Only about 1% of new auto loans are this big, according to Cox Automotive data.
By comparison, the average new car buyer would be able to deduct $3,000 of interest from their taxable income in the first year of their loan, Smoke said. A deduction of that size would yield an average total tax benefit of about $500 or less in the loan’s first year, he said.

Above-the-line tax deductions

Jgi/jamie Grill | Tetra Images | Getty Images

There are, however, two elements of the tax breaks that seek to better target benefits to low- and middle- income households.
For one, they’re all what’s known as “above-the-line” deductions.
This means households can claim them regardless of whether they use the standard deduction or itemize their deductions.
High-income households may be more likely to itemize, meaning they detail a list of eligible deductions on their tax return.

Taxpayers itemize when the deductions add up to more than the standard deduction. Some deductions are only available to taxpayers who itemize, such as for “SALT” (or, a deduction for state and local income taxes and property taxes) or mortgage interest.
Also, the new deductions have income limits, barring them from the highest-income households.
For example, the overtime deduction’s value starts to decline once an individual’s income exceeds $150,000 ($300,000 for married couples filing jointly). The value of the senior “bonus” falls once income exceeds $75,000 ($150,000 if married and filing jointly).

Tax credits

Tax credits are another mechanism to lower a household’s tax bill.
A tax credit reduces your tax liability dollar-for-dollar. (If you claim a $1,000 credit, it can reduce your tax bill by $1,000.) Credits have the same dollar value regardless of your tax bracket.
Unlike deductions, the “benefits from tax credits are skewed toward lower- and middle-income households,” the Congressional Budget Office wrote in 2021.
Credits can be “refundable” or “nonrefundable”:

Refundable: The credit can reduce your tax bill below zero. In this case, you’d get a tax refund. For example, if your tax liability is $500 and you qualify for a $600 refundable credit, you’d get a $100 refund, according to a CBO example. Some credits are partially refundable, which limits the size of the refund.

Nonrefundable: Other credits are nonrefundable, meaning that they can reduce your tax bill to zero, but no lower. Credits that are nonrefundable or only partially refundable may prevent those with low incomes from getting the full value.

The largest credits for individuals as measured by total government outlay are the child tax credit, earned income tax credit and the premium tax credit for health insurance, CBO said.
The Senate legislation would permanently raise the maximum child tax credit to $2,200 starting in 2025, and would index this figure for inflation starting in 2026. The credit is partially refundable: Low earners can get up to $1,700 as a tax refund.
But currently, 17 million children do not receive the full $2,000 child tax credit because their families don’t earn enough and owe enough taxes, according to the Center on Budget and Policy Priorities. More

Jawaharlal Nehru, India’s first prime minister, and Donald Trump, America’s president, do not share many similarities. Nehru was an erudite product of Harrow School and Trinity College, Cambridge; Donald Trump, for all his expensive education, is ultimately a rough-and-tumble graduate of New York real estate. A freedom fighter before becoming prime minister, Nehru spent nine years in British-run jails having campaigned against imperial rule; Mr Trump’s tangles with the law have involved hush money for a porn star. Nevertheless, Nehru’s Fabian socialism—a patrician distrust of commerce mixed with an intellectual love of scientific progress—means his views on trade are, many years later, mirrored by Mr Trump’s America-first instincts. More

Goldman Sachs and Wells Fargo shares hit record highs Wednesday after the Wall Street banks announced dividend hikes following Tuesday’s close. Both join the laundry list of Club holdings to hike their payouts to investors in 2025. After the financial firms passed the Federal Reserve’s annual stress test on Friday night, Goldman said Tuesday that it is raising its quarterly dividend payout to $4 a share from $3. That’s a 33% increase and the largest among the 15 portfolio names that boosted their dividends so far this year. Meanwhile, Wells Fargo hiked its quarterly payout by 12.5% to 45 cents from 40 cents. The dividend hikes by Goldman and Wells – along with the other Club stocks that boosted their distributions in the first six months of the year – are generally positive signs for investors. A dividend increase requires a company to distribute more profit to shareholders. It typically means management has a strong enough conviction in cash flow to support the bigger payout over time. Case in point: Shares of Goldman and Wells Fargo jumped nearly 1.5% and 1%, respectively, Wednesday. This follows 13 other Club holdings raising their dividends earlier this year. After Goldman, Danaher had the biggest dividend hike on a percentage basis at 18.5%. The company announced in February that it would raise its quarterly payout to 32 cents a share from 27 cents. Eaton, Texas Roadhouse and Costco also boosted their contributions to shareholders in recent months by double-digit percentages. Here’s a full list of the Club holdings that raised dividends in 2025, including those not mentioned earlier like Home Depot, Meta Platforms, Linde, Apple, BlackRock, Salesforce, Coterra and DuPont. Currently, the vast majority of our Club holdings – 27 out of 30 – pay out dividends. The only three that do not are Amazon, CrowdStrike and Palo Alto Networks. For its part, Nvidia’s is miniscule, at only 1 cent a share. Of course, dividends are only one factor to consider when deciding whether to invest in a stock. For most of our names, their annualized yields are fairly small in the grand scheme of things. Consider Meta Platforms , which last year began to pay a dividend for the first time in its history. In February of this year, the social media giant boosted its quarterly dividend to 52 cents a share from 50 cents, which translates to an annualized yield of 0.29%, as of Tuesday’s close. Still, the stock is trading near record highs on Wednesday. Shares of the Facebook parent are up 22% year to date, versus the tech-heavy Nasdaq Composite’s roughly 5.5% advance. However, when there’s steady dividend growth alongside share price appreciation, it can improve total returns over time. That is true even for stocks typically not coveted for their large payouts, such as Texas Roadhouse, which supports a 1.44% yield. Over the past 10 years, the stock is up around 404% on a price return basis — and 494% on a total return basis. Indeed, to capture the benefits of compound interest, we strongly recommend members reinvest their dividends . So, who is next? We’re expecting that additional portfolio companies will announce dividend hikes in 2025. Eli Lilly raised its dividend by 15% last December, which was the seventh consecutive annual increase of that magnitude. We hope to see this again in the second half of the year. Meanwhile, Microsoft and Honeywell have in recent years announced dividend increases in the month of September. And while Capital One did not raise its dividend like its portfolio banking peers Tuesday, management is expected to announce some updated return of capital to shareholders later this year. In fact, Truist analysts said Monday that the credit card issuer has $15 billion of excess capital. That’s roughly 11% of the company’s market capitalization. Still, Jim Cramer believes the company will also invest back in the business. “I think [CEO] Richard Fairbank can take some of that capital and really make it into the rival of American Express ,” Jim said during Wednesday’s Morning Meeting . This follows Capital One’s big acquisition of Discover Financial — which was a key reason why the Club initiated a position in the financial stock, which is on pace for its 10th straight day of gains. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. More

Santander has agreed to buy British high street lender TSB for £2.65 billion from Catalonia’s Sabadell in an all-cash deal.
“We never thought of leaving the U.K. The U.K. is very important for us,” Santander Chief Financial Officer Jose Garcia Cantera told CNBC’s “Squawk Box” on Wednesday.
The transaction further complicates the picture for consolidation in the Spanish banking sector, where TSB-owner Sabadell seeks to fend off the advances of BBVA.

A sign hangs from a branch of Banco Santander in London, U.K., on Wednesday, Feb. 3, 2010.
Simon Dawson | Bloomberg via Getty Images

In one move, Santander has silenced months of speculation over it’s allegiance to the British high street – and complicated a year-long consolidation saga in Spain’s banking sector.
On Tuesday, Spain’s largest lender said it agreed to buy British high street lender TSB for £2.65 billion ($3.6 billion) from Catalonia’s Sabadell in an all-cash deal subject to approval. The transaction will generate a return on invested capital of more than 20%, bringing its return on tangible equity in the U.K. from 11% last year to 16% by 2028, Santander said.

Acquisitions have been at the heart of Santander’s British expansion after it entered the market in 2004 through the purchase of Abbey National. But the profitability of the U.K. branch has faltered — with pre-tax profit down by an annual 38% last year — sparking questions over Santander’s long-term presence in Britain. A March announcement of potential layoffs and 95 branch closures did little to abate the rumors despite CEO Ana Botin’s frequent denials.
“We never thought of leaving the U.K. The U.K. is very important for us,” Santander Chief Financial Officer Jose Garcia Cantera told CNBC’s “Squawk Box” on Wednesday. “It’s actually the largest balance sheet of all the countries [where] we operate. It’s a high quality, low-risk business, predictable returns, in hard currency, in sterling, and this helps to stabilize our risk-return profile.” 
He added that the U.K. has “always been a very important and core component of Santander’s diversification strategy.”
The TSB acquisition, meanwhile, “not only makes sense strategically, as I said, the U.K. helps with our risk-return profile, but it’s also financially very, very compelling.”
The deal could work as a defensive play from Sabadell, which only took over TSB from Lloyds in 2015 and seeks to stop a takeover bid from Spanish peer BBVA. The two banks have been locked at odds since Sabadell rejected BBVA’s initial all-share merger offer in May last year, on grounds of it undervaluing the acquisition target.

Now entrenched in a potential 14-billion-euro hostile takeover, BBVA has decided to keep its bid alive despite a recent condition from the Spanish government that the takeover may only proceed if the two banks do not integrate their operations for at least three years.
Over this period, “both entities maintain [must] separate judicial identity and assets, as well as autonomy in the management of their activities,” Spanish Economist Minister Carlos Cuerpo said during a press briefing, according to a CNBC translation.

Spanish banking competition ‘toughest in Europe’

Madrid — whose government under Prime Minister Pedro Sanchez depends on parties in Sabadell’s home base of Catalonia — has long opposed the deal amid concerns over job losses, received a late-May caution from the European Commission against hindering the merger unduly.
“It is important that banking sector consolidation can take place without undue or inappropriate obstacles being imposed,” said Olof Gill, the European Commission’s spokesperson for financial services, according to Reuters. Spain’s antitrust watchdog has already cleared the acquisition. 

It remains to be seen whether the TSB sale will dull BBVA Chairman Carlos Torres Vila’s appetite to press ahead with submitting a merger offer to Sabadell shareholders once permissions come through.
RBC analysts on Wednesday assessed that Santander’s acquisition of TSB “seems to be a last major effort to convince [Sabadell]’s shareholders to not accept BBVA’s offer during the upcoming take-up period” and would “likely further complicate” BBVA’s takeover.
“We are completely neutral on the Sabadell-BBVA transaction,” Santander’s Garcia Cantera told CNBC. “This is an asset that becomes available in one of the countries where we operate, and it’s our fiduciary duty to look at all these opportunities and try to do our best for our shareholders.”
Yet he recognized that competition in Spanish banking at present is “probably the toughest in Europe,” citing the weak price of domestic mortgages.
“I don’t think this is going to make banking in Spain more comfortable. Probably the opposite,” Garcia Cantera said. More

Xpeng reported an eighth-straight month of more than 30,000 monthly vehicle deliveries amid a fierce price war in China.
Xpeng’s U.S.-listed rivals, which target a more premium segment of China’s car market, saw more modest sales momentum.
BYD remained the market giant, with its passenger car sales edging higher in June to 377,628 vehicles.

Chinese electric car company Xpeng displays its mass-market Mona M03 coupe inside a headquarters’ showroom in Guangzhou, China, on Aug. 26, 2024.
CNBC | Evelyn Cheng

BEIJING — Chinese electric car startup Xpeng is keeping up the sales momentum against its rivals, even as BYD expands on its market dominance amid a fierce price war in China.
Xpeng said Tuesday it delivered 34,611 cars in June, its eighth-straight month of delivering more than 30,000 cars.

Shares rose more than 2% in New York trading. Xpeng did not specify what portion of the deliveries were for its cars with advanced driver-assist, or for its lower-priced Mona brand.
China’s electric car price war has only intensified in recent weeks, drawing government criticism for “involution,” or excessive, non-productive competition. Chinese President Xi Jinping on Tuesday also led a high-level financial and economic commission meeting that called for more governance of “low price, disorderly competition,” according to a CNBC translation of Chinese state media.

Mixed results for competitors

Xpeng’s U.S.-listed rivals, which target a more premium segment of China’s car market, saw more modest sales momentum.
Geely-backed Zeekr reported 16,702 car deliveries in June, down 11.7% from the prior month and 16.9% year over year.
Nio reported 24,925 car deliveries in June, a slight increase from May, thanks to growth across its premium “Nio” brand and lower-priced Onvo and Firefly brands.

Li Auto reported 36,279 vehicle deliveries in June, a 11.2% drop from May, but its total deliveries in the second quarter came in at 111,074 units, better than the company’s lowered guidance of 108,000 cars. The company on Friday cut its second-quarter delivery outlook by more than 15,000 cars, attributing the decline to an upgrade to its sales system.
“Based on our channel checks and analysis, we understand Li Auto has started toprohibit extra rebates [from salespeople sharing their commission with customers] within its sales network since the beginning of June 2025,” Nomura analysts said in a report Sunday. They viewed the automaker’s moves as an effort to limit competition among its salespeople while focusing on improving services and brand recognition.
Most of Li Auto’s models are SUVs that come with a fuel tank, which extends the car’s driving range and addresses one of the biggest consumer concerns about electric vehicles. Li Auto’s monthly deliveries had surpassed 50,000 late last year.

Tesla under pressure

Hong Kong-listed Xiaomi reported deliveries of over 25,000 electric cars in June, a slight decrease from the previous month.
Less than a day after announcing its new YU7 SUV would be 10,000 yuan ($1,400) cheaper than Tesla’s Model Y, the Chinese smartphone maker said its car received more than 240,000 locked-in orders. Xiaomi claimed the YU7 offered a longer driving range than the Model Y, but acknowledged that Tesla’s assisted-driving system was more advanced.
YU7 SUV deliveries are now slated to take more than half a year, if not much longer, according to Xiaomi’s online ordering portal. The company had initially said deliveries would take one to five weeks.
“We believe a significant portion of new orders may come from scalpers, reflecting expectations of extreme popularity for the new model,” Junheng Li, CEO, head of research, at JL Warren Capital, said in a note Wednesday.
“We estimate [Tesla] Q2 sales in China to be ~128K units, down 12% YoY, pressured by intensifying competition from Chinese brands’ new model launches,” Li said.
Tesla raised its price in China for the Model 3 long-range all-wheel drive by 10,000 yuan, according to its website Tuesday.
As of May, Tesla was the fifth-largest automaker by market share in China’s new energy vehicle segment, which includes battery-only and hybrid-powered cars. The figures from the China Passenger Car Association showed that Tesla’s retail sales in the country for the first five months of the year fell slightly to just over 200,000 vehicles. Figures for June were not available as of Wednesday morning local time.
Leapmotor, which has partnered with Stellantis, the owner of Chrysler and Jeep, for the overseas market, also maintained steady growth in June with record deliveries of 48,006 cars for the month. Aito, which uses Huawei technology for the car’s entertainment and driver-assist system, reported 44,685 car deliveries for last month.

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Competing against a giant

BYD remained the market giant, with its passenger car sales edging higher in June to 377,628 vehicles, more than half of which were of battery-only cars. The rest were plug-in hybrid electric cars.
That brought BYD’s passenger car sales for the first half of the year to 2.1 million vehicles.
In contrast, Leapmotor and Li Auto each saw deliveries of more than 200,000 cars in the first half of the year, while Xpeng came just shy of the benchmark at 197,189 vehicle deliveries.
Xiaomi’s deliveries for the first half of the year exceeded 150,000 cars, according to CNBC calculations of publicly available figures.
BYD, Xiaomi, and Geely will be the most likely to survive any chaotic industry consolidation, predicted Michael Dunne, head of advisory at Dunne Insights.
Speaking on CNBC’s “The China Connection,” he added that Nio might be at risk despite having a great product and “doing all the right things” due to their poor finances. More

Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank would have eased monetary policy by now if not for President Donald Trump’s tariff plan.
Powell’s admission comes as the Fed has entered a holding pattern on interest rates despite mounting pressure from the White House.

US Federal Reserve Chair Jerome Powell testifies during a House Financial Services Committee hearing on “The Federal Reserve’s Semi-Annual Monetary Policy Report” on Capitol Hill in Washington, DC on June 24, 2025.
Saul Loeb | Afp | Getty Images

Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank would have eased monetary policy by now if not for President Donald Trump’s tariff plan.
When asked during a panel if the Fed would have lowered rates again this year had Trump not announced his controversial plan to impose higher levies on imported goods earlier this year, Powell said, “I think that’s right.”

“In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said at European Central Bank forum in Sintra, Portugal.
Powell’s admission comes as the Fed has entered a holding pattern on interest rates despite mounting pressure from the White House.
The Fed last month held the key borrowing rate steady once again, keeping fed funds at the same range between 4.25% and 4.5% where it’s been since December.
The central bank’s policy-setting Federal Open Market Committee indicated via its so-called dot plot of members’ projections that there could be two cuts by the end of 2025. However, Powell also said at a press conference last month that the Fed was “well positioned” to remain in a wait-and-see mode.
On Tuesday, Powell was asked if July would be too soon for markets to expect a rate cut. He answered that that he “really can’t say” and that “it’s going to depend on the data.” Fed funds futures traders are pricing in a more than 76% likelihood that the central bank once again holds rates steady at the July policy gathering, according to the CME FedWatch tool.

“We are going meeting by meeting,” Powell said during Tuesday’s panel. “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolve.”
Powell’s future at the Fed
The Fed’s unrelenting position to keep rates where they are for now has caught the ire of Trump and his administration, who have publicly admonished Powell for the central bank’s failure to lower borrowing costs. Trump last week called Powell “terrible” and said he was a “very average mentally person.”
When asked on Tuesday if he would stay on as Fed governor after his term as chair ends next year, Powell responded, “I have nothing for you on that today.” Powell’s term as a Fed chair ends in 2026, while his position as governor is set to run into 2028.
Global trade policy and Trump’s attacks on Powell took center stage at Tuesday’s event, where the U.S. Fed chief was flanked on the panel by other leaders of central banks from around the globe. International central bank leaders fielded questions ranging from whether they’d act as Powell if they were in his shoes, to whether nations are breaking away from the U.S.
Trump’s on again, off again tariff policy has put global markets and monetary policy makers on edge. The president first unveiled a plan for steep levies on imported goods in early April, before delaying many of the steepest tariffs shortly after when U.S. markets tumbled.
The U.S. stock market has more than regained losses recorded in the wake of Trump’s initial announcement, with the S&P 500 hitting all-time highs in recent days for the first time since February. But investors and monetary policymakers still report feeling uncertain about the future of global trade and its impact on global economic growth, profits and stock markets.
“All I want — and all anybody at the Fed wants — is to deliver an economy that has price stability, maximum employment, financial stability,” Powell said. “What keeps me awake at night is: How do we get that done? I want to hand over to my successor an economy in good shape.” More