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President Trump's flagship tax legislation, the One Big Beautiful Bill Act (OBBBA), ed the House with sweeping tax cuts and significant changes to Biden-era green energy incentives, now facing scrutiny in the Senate where Republicans are divided over its $2.4 trillion impact on the deficit.
The legislation fulfills several of Trump's campaign promises, including making his 2017 tax cuts permanent and eliminating taxes on tipsand overtime for workers earning less than $160,000 annually, while also cutting green energy tax credits and increasing the SALT deduction cap to $40,000.
Major tax cuts and changes in the Big Beautiful Bill
The One Big Beautiful Bill Act represents one of the most comprehensive tax reform packages in years, with provisions affecting virtually every American taxpayer and business. The bill would make permanent the tax rates established under Trump's 2017 Tax Cuts and Jobs Act (TCJA), which are currently set to expire at the end of 2025. This would maintain the 37% top individual income tax rate rather than allowing it to revert to the previous 39.6% rate.
Among the most notable aspects of the legislation is the fulfillment of Trump's campaign promise to eliminate federal income taxes on tips for workers making less than $160,000 annually. The same income threshold would apply to a similar exemption for overtime pay, with no cap on how much overtime compensation workers could claim as tax-free. Both tax breaks would expire at the end of 2028, after Trump's term ends.
The bill also significantly increases the state and local tax (SALT) deduction cap from $10,000 to $40,000 for t filers earning less than $500,000 per year, with the cap increasing by 1% annually. This change would particularly benefit taxpayers in high-tax states like New York and California, though Senate Majority Leader John Thune has indicated the higher cap may not survive Senate consideration.
Green energy rollbacks and other significant changes
The Big Beautiful Bill takes direct aim at several key components of President Biden's green energy agenda by eliminating or significantly reducing tax credits established by the Inflation Reduction Act. Homeowners would lose tax credits worth 30% of the cost for solar s, wind turbines, and energy-efficient improvements like windows and heat pumps.
Electric vehicle incentives face complete elimination under the bill, ending tax credits of up to $7,500 for new electric vehicles and up to $4,000 for used ones. The legislation also terminates tax incentives for homes and businesses installing EV charging stations, with all these green energy provisions ending at the conclusion of this year if the bill becomes law.
Other significant tax changes include removing the $200 excise tax on gun silencers that has been in place since 1934-a major victory for the National Rifle Association-and repealing the 10% excise tax on indoor tanning services that was implemented as part of the Affordable Care Act in 2010.
The bill would also create "Trump savings s" for parents to open for their newborn children, with a contribution limit of $5,000 per year. The government would provide an initial deposit of $1,000 for each newborn child.
On the education front, the legislation cuts $330 billion from student loan programs over the next decade and establishes an income-based "Repayment Assistance Plan" as the new standard for student loans. It also modifies the Pell Grant program by increasing the number of required credits per semester for low-income students.
According to analysis from the Tax Foundation, the major tax provisions in the bill would lead to a 0.8 percent long-run expansion of the economy, with the creation of approximately 983,000 full-time equivalent jobs. However, the bill would also increase the federal budget deficit by $2.6 trillion over ten years before ing for interest costs, or $1.7 trillion when considering potential economic growth.
Republican fiscal hawks in both the House and Senate have expressed serious concerns about the deficit impact, making significant changes likely as the bill works its way through the Senate. Several GOP senators, including Ron Johnson and Rand Paul, have stated they cannot the legislation in its current form, setting the stage for potentially contentious negotiations in the coming weeks.