In early 2025, after intense lobbying by President Donald Trump and some last-minute changes, House Republicans passed the One Big Beautiful Bill Act. This huge law combines big tax cuts with major cuts to social safety net programs. The bill is over 1,000 pages long and aims to continue the effects of the 2017 Tax Cuts and Jobs Act (TCJA) while changing how the government spends money. Now that it has passed the House, it will move to the Senate. This article explains the main parts of the One Big Beautiful Bill Act, what benefits it promises, and how it might affect the country’s finances over the next ten years and beyond.
Main Features of the One Big Beautiful Bill Act
The One Big Beautiful Bill Act is divided into several parts that focus on tax cuts, spending cuts, and new programs to help people save money.
Permanent Tax Cuts in the Bill
- Income Tax Rates: The bill makes permanent the lower income tax brackets from the TCJA, preventing a tax increase after 2025. Rates for 2026 range from 10% to 37%.
- Standard Deduction: The nearly doubled standard deduction becomes permanent — $16,300 for singles, $24,500 for heads of household, and $32,600 for married couples filing jointly.
- Child Tax Credit: The $2,000 credit per child is permanent, with a temporary increase to $2,500 from 2025 to 2028. It requires valid Social Security numbers to reduce fraud.
- Estate and Gift Tax: The exemption amounts increase to $15 million for singles and $30 million for married couples in 2026 and are indexed to inflation.
- Business Income Deduction: The 20% deduction for pass-through business income becomes permanent and rises to 23% after 2025.
These tax cuts are meant to help families and businesses by leaving them with more money and encouraging economic growth.
New Tax Benefits for Middle and Working-Class Americans
- No Tax on Tips: From 2025 to 2028, tips received in certain jobs (like food service and beauty) won’t be taxed for workers making under $147,000.
- No Tax on Overtime: Overtime pay will also be tax-free during this time for eligible workers.
- Car Loan Interest Deduction: Up to $10,000 interest on car loans for U.S.-assembled vehicles can be deducted temporarily for incomes under $100,000 (single) or $200,000 (joint).
- Senior Deduction: Seniors (65+) earning below certain limits can deduct $4,000 from their income (2025–2028).
- Employer Child Care Credit: Businesses get bigger tax credits for providing child care, encouraging more support for working families.
These new benefits aim to help middle and working-class Americans and encourage employers to offer more family-friendly benefits.
MAGA Accounts: Saving for the Future
Starting in 2026, parents can open MAGA (Money Accounts for Growth and Advancement) accounts for kids under 8 years old. They can contribute up to $5,000 a year, invested in U.S. stock index funds. Withdrawals can be used tax-free for education, starting a business, or buying a home. Also, a newborn pilot program will add $1,000 from the government to these accounts for children born between 2024 and 2028.
This program helps families save money and build wealth for their children’s future.
Health and Education Support in the One Big Beautiful Bill Act
- Health Savings Accounts (HSAs): More people can use HSAs, including Medicare Part A enrollees and those using direct primary care. Contribution limits increase for low earners, and fitness expenses up to $500 (individual) or $1,000 (family) are allowed.
- 529 Plans: Can now be used for more education expenses like K–12 tutoring and homeschooling, as well as credentialing programs after high school.
- Adoption Credit: Adoption tax credit is partly refundable up to $5,000 and recognizes special needs eligibility determined by tribal governments.
These changes help families with health and education costs.
Spending Cuts in the One Big Beautiful Bill Act
- Medicaid Cuts: The bill cuts $625–$715 billion over 10 years by requiring work (80 hours per month for some adults), reducing federal funding rates, and tightening eligibility rules.
- SNAP Cuts: Food assistance funding is cut by $230–$300 billion, with stricter work requirements for adults 55–64 and some parents, plus higher state costs.
- Student Loans: $350 billion in federal student loan programs, including forgiveness and income-based repayment plans, are eliminated.
- Clean Energy Credits: Tax credits for clean vehicles, energy-efficient homes, and clean electricity are phased out by 2025 or 2031, cutting support for renewable energy.
These cuts aim to lower government spending but may impact low-income families and renewable energy efforts.
New Spending Priorities
- Defense and Immigration: $350 billion is allocated, including $150 billion for the Pentagon’s new “Golden Dome” defense system and funds for border security and deportations.
- Fraud Prevention: AI tools will reduce improper Medicare payments, the Earned Income Tax Credit is reformed to prevent duplicates, and the IRS Direct File program ends in favor of a public-private partnership for tax filing.
These investments focus on national security and government program efficiency.
Debt Ceiling and Fiscal Impact
- Debt Limit Increase: The bill raises the debt ceiling by $4 trillion to cover its spending.
- Deficit Impact: Tax cuts add $3.8 trillion to the deficit over 10 years; spending cuts reduce $1 trillion; new spending adds $350 billion. Net increase is about $2.8 trillion before interest.
- Total Debt Growth: Including interest, debt will grow by $3.1–$3.3 trillion, pushing the national debt from $37 trillion to around $40 trillion by 2034.
- Debt-to-GDP Ratio: Expected to rise from about 120% to 125–130%, causing concern for long-term fiscal health.
Long-Term Effects of the One Big Beautiful Bill Act
- Economic Growth: The bill is expected to boost GDP by 0.5–1% annually in the short term by increasing income and business investments. However, growth may slow after 2030 due to rising debt and interest.
- Income Inequality: The wealthiest benefit most, with the top 0.1% getting big tax cuts, while the poorest lose through Medicaid and SNAP cuts. Middle-class relief is mostly temporary.
- Program Sustainability: Cuts to Medicaid and SNAP could lead to more uninsured people and food insecurity, which may offset economic gains.
- Energy and Investment: Ending clean energy credits could slow renewable growth and increase fossil fuel use. MAGA accounts help families save and build wealth over time.
Risks and Uncertainties
- Rising Interest Rates: Growing debt may increase interest rates by 0.2–0.5%, raising government borrowing costs and reducing funds for other programs.
- Senate Changes: The Senate might reduce some tax cuts or spending cuts to address public concerns, lowering the deficit impact.
- Economic Conditions: Growth projections depend on a stable economy. A recession or higher inflation could worsen the deficit, while stronger growth could help.
Conclusion: What the One Big Beautiful Bill Act Means for America
The One Big Beautiful Bill Act is a major attempt to lock in tax cuts, cut spending on social programs, and shift priorities to defense and financial security. It permanently extends many TCJA tax benefits and creates new ways for families to save money, like MAGA accounts. However, deep cuts to Medicaid, SNAP, student loans, and clean energy raise questions about fairness and long-term economic effects.
Financially, the bill increases the national debt by over $3 trillion in the next decade, pushing debt-to-GDP higher and creating fiscal risks. The final outcome depends on Senate revisions and the economy’s future. As this bill moves forward, its impacts will shape America’s fiscal and social landscape for years to come.
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