Kara Sears
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, marking the most significant legislative changes to federal tax policy since the 2017 Tax Cuts and Jobs Act (TCJA). The OBBBA extends and builds upon the TCJA, introducing sweeping changes to the tax code and impacting how Americans file their taxes in 2025 and beyond. This update includes refined modeling results reflecting amendments made in the Senate, passed by both chambers of Congress before being signed by President Trump.
| Characteristics | Values |
|---|---|
| Date | 4 July 2025 |
| Name of the bill | One Big Beautiful Bill Act |
| Signed by | President Trump |
| Other names | OBBBA, 2025 Reconciliation Legislation (H.R. 1) |
| Tax cuts | $4.5 trillion from 2025 through 2034 |
| GDP | Increased by 1.1% |
| GNP | Increased by 0.4% |
| Average tax cut per taxpayer | $3,700 |
| Largest tax cuts | Wyoming, Washington, Massachusetts |
| Smallest tax cuts | West Virginia, Mississippi |
| Tax cuts for households earning less than $100,000 | 12% |
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What You'll Learn
- The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump on December 22, 2017
- The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, by President Trump
- The TCJA permanently reduced the corporate income tax rate from 35% to 21%
- The OBBBA makes permanent the individual tax changes first introduced by the TCJA
- The OBBBA introduces new tax laws, including No Tax on Tips
The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump on December 22, 2017
On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (TCJA) into law. The Act was passed by the Senate on December 20, 2017, with a vote of 51-48, and by the House on the same day with a vote of 224-201. The TCJA made significant changes to the tax code, including lowering the corporate income tax rate from 35% to 21%, doubling the maximum child tax credit, and introducing a 1.4% tax on large university endowments.
The TCJA was supported by the Trump Administration's Council of Economic Advisors, who claimed it would have significant economic benefits. They argued that the tax cuts would pay for themselves, and that the legislation would simplify the tax code. However, the TCJA was opposed by Democrats, who viewed it as a giveaway to corporations and high earners at the expense of middle-class communities.
The Penn Wharton Budget Model estimated that by 2027, the TCJA would lead to a higher GDP level of between 0.6% and 1.1%. However, it was also estimated that debt would increase by between $1.9 trillion and $2.2 trillion during this period. Additionally, there were important differences between the House and Senate versions of the bill due to reconciliation rules and the Byrd Rule.
In 2025, President Trump signed the One Big Beautiful Bill Act into law, which extended and built upon the TCJA. This legislation made the individual tax changes of the TCJA permanent and provided additional tax cuts and changes to the tax code. It was projected to increase long-run GDP by 1.1-1.2% and reduce federal tax revenue by $4.5-$5 trillion from 2025 to 2034.
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The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, by President Trump
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. This was a significant moment in US history as it was the largest tax cut in American history. The Act was passed by both houses of Congress, with Vice President JD Vance casting the tie-breaking vote in the Senate.
The OBBBA made permanent the individual tax changes first introduced by the 2017 Tax Cuts and Jobs Act (TCJA), which included the bigger Standard Deduction, no personal or dependent exemptions, and income tax rates. It also added some new tax rules, such as the "No Tax on Tips" law, which allows workers in industries where tipping is customary to claim a dollar-for-dollar deduction for a designated amount of tips earned. Additionally, the OBBBA provided tax incentives for businesses that manufacture more in the US and hire American workers.
The legislation was supported by the Trump Administration's Council of Economic Advisors, who claimed it would have significant economic benefits. They argued that the tax cuts would pay for themselves, and Republican supporters characterised the bill as a simplification of the tax code. However, Democrats opposed the legislation, viewing it as a giveaway to corporations and high earners, with every House Democrat voting against it.
The OBBBA was expected to have a major impact on the US economy, with estimates suggesting it would increase long-run GDP by 1.1-1.2% and reduce federal tax revenue by $4.5-$5 trillion from 2025 to 2034. It was projected to cut taxes across the US, with the average tax cut per taxpayer being over $3,700 in 2026.
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The TCJA permanently reduced the corporate income tax rate from 35% to 21%
The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump on December 22, 2017. The TCJA made significant changes to the US tax code, including permanently lowering the corporate income tax rate from 35% to 21%. This reduction in the corporate tax rate was a key component of the TCJA and had been a campaign promise of President Trump.
The corporate income tax rate had previously stood at 35% for several years, and the reduction to 21% represented a significant decrease. This change was intended to stimulate economic growth and make US businesses more competitive globally. Supporters of the TCJA argued that it would simplify the tax code and provide tax relief to American businesses, ultimately benefiting the economy as a whole.
However, the TCJA was not without its critics. Opponents, primarily from the Democratic Party, argued that the legislation disproportionately favoured corporations and high earners at the expense of middle-class communities. They also criticised the potential impact on the federal budget deficit, as the tax cuts were estimated to reduce federal tax revenue substantially.
Despite the criticisms, the TCJA was passed by the Senate and the House, largely along party lines, before being signed into law by President Trump. The legislation also included other provisions, such as changes to individual tax brackets and deductions, which had varying effective dates.
In 2025, President Trump signed another significant tax bill into law, known as the One Big Beautiful Bill Act (OBBBA). This legislation built upon the TCJA by making some of its provisions permanent and introducing additional tax cuts and changes to the tax code. OBBBA was also aimed at extending the benefits of the TCJA beyond its initial timeframe and providing further economic stimulus.
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The OBBBA makes permanent the individual tax changes first introduced by the TCJA
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, makes permanent the individual tax changes first introduced by the 2017 Tax Cuts and Jobs Act (TCJA). The OBBBA notably includes permanence for major individual and corporate provisions of the TCJA, along with additional temporary tax cuts. The TCJA reduced taxes for most individuals and businesses in 2017, but most of the individual tax changes were scheduled to expire at the end of 2025. These expirations would have increased the tax burden on about 62% of tax filers.
The OBBBA makes the 2017 tax changes permanent, including the larger standard deduction, more generous child tax credit (CTC), lower ordinary tax rates, and tighter limitations on certain itemized deductions such as the deduction for home mortgage interest (HMID). The permanence of TCJA-related individual provisions makes up most of the value of the tax cuts in the OBBBA. The legislation generally makes permanent the seven rates created by the TCJA, with an initial inflation adjustment in 2026 for the first two brackets (10%, 12%). The permanent brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
The OBBBA also addresses the expiration of the TCJA tax cuts at the end of 2025 by making those tax changes permanent and enacting many of President Trump's campaign proposals to exempt certain types of income from tax, such as tips and overtime pay. The law also includes changes to international tax policy and makes pro-growth tax provisions like full expensing permanent. The OBBBA provides additional tax cuts to individuals and businesses on top of TCJA extensions, including new deductions for tipped and overtime income and an expanded child tax credit and standard deduction.
The average tax cut per taxpayer across all individual tax filers is estimated to be over $3,700 in 2026. However, certain individual changes like deductions for tips and overtime income will expire, causing the average tax cut to fall to $2,505 in 2030. The OBBBA is expected to reduce federal taxes on average for individual taxpayers in every state, with taxpayers in Wyoming, Washington, and Massachusetts seeing the largest average tax cuts in 2026, while those in West Virginia and Mississippi will experience the smallest.
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The OBBBA introduces new tax laws, including No Tax on Tips
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The OBBBA notably includes permanence for major individual and corporate provisions of the TCJA, along with additional temporary tax cuts for individuals.
The OBBBA introduces new tax laws, including the "No Tax on Tips" law. This law allows workers in qualifying tipped occupations to deduct up to $25,000 of their tips from their taxable income for tax years 2025 through 2028. The income limit will be adjusted for inflation. Jobs that qualify for this deduction include those where tipping is customary, such as servers, bartenders, hair stylists, and nail technicians. The specific jobs that qualify will be outlined by the U.S. Treasury Department and IRS in later guidance.
The "No Tax on Tips" law also expands a tax credit for certain businesses, allowing them to claim credits for payroll taxes paid on tips, similar to restaurants. This law is expected to put more money in the pockets of many tipped workers, although it may not impact those who already do not earn enough to owe income tax.
In addition to the "No Tax on Tips" law, the OBBBA also makes other changes to taxes and spending. It extends the expiring 2017 Tax Cuts and Jobs Act (TCJA) and provides additional tax cuts, such as a deduction for overtime pay. It also reduces spending by nearly $1.1 trillion, resulting in a dynamic deficit increase of $3 trillion from 2025 to 2034. The OBBBA is expected to increase long-run GDP by 1.1-1.2% and reduce federal tax revenue by $4.5-$5 trillion from 2025 to 2034.
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Frequently asked questions
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law.
The One Big Beautiful Bill Act (OBBBA) was passed to make the expiring 2017 Tax Cuts and Jobs Act (TCJA) permanent, provide additional tax cuts, and reduce spending.
The Act introduced several changes, including:
- No tax on tips
- No tax on overtime pay
- No tax on car loan interest
- Tax relief for seniors
- Enhanced adoption tax credit
- Expanded child and dependent care credit
