“Beautiful” it is not.
The One Big Beautiful Bill Act, Donald Trump’s signature second-term domestic legislative package, is winding its way through Congress. Republicans in the Senate and House are working on their versions, and the president hopes to sign the act into law by Independence Day.
If enacted, the OBBBA would be among the most consequential pieces of legislation in recent memory. It would cost more than Trump’s COVID-rescue bill, Joe Biden’s COVID-rescue bill, Trump’s first-term tax cut, George W. Bush’s tax cut, or Barack Obama’s stimulus package; it would dwarf the Affordable Care Act in its budget impact. Still, two in three Americans say they have heard little or nothing about it.
I cannot definitively say what will end up in the legislation; no one can at this point. Elected Republicans are actively negotiating, and the Senate parliamentarian—a nonpartisan official who determines whether individual precepts are permissible, according to Congress’s technical rules—is scrutinizing the proposal. Still, the OBBBA’s broad strokes are clear.
The legislation is, first and foremost, a tax cut. The proposal extends the temporary tax breaks Trump enacted in his first term and creates new ones, meaning the federal government would raise roughly $4 trillion less in revenue over the coming decade. The proposal would permanently fix the top income-tax rate at 37 percent and make a number of other fiddly changes, including giving a tax break to high-income households in high-tax states and exempting mammoth inheritances from taxation. If you’re looking to give $29,999,999 to your heirs, this bill is for you.
The tax code would become more regressive. By one estimate, households in the top 0.1 percent of the income distribution would get a $296,160 annual tax break. Families in the top 1 percent would retain $78,650 a year. The average family in the bottom fifth of the income distribution would get a tax cut of $160.
On the campaign trail, Trump promised to get rid of taxes on Social Security benefits. The bill does not do that. Trump also promised “no taxes on tips.” The bill creates a profession-specific, fine-print loophole for tipped income. But many hairdressers and barbacks do not earn enough to pay federal income taxes anyway, and tax professionals figure that rich people will exploit the provision by making their earnings look like tips. As the OBBBA makes the tax code more regressive, it also makes it more complicated, a boon for multinational corporations employing creative accountants and a blow for American business dynamism.
