How the One Big Beautiful Bill Reshapes Taxes for Families, Workers, and Businesses

Permanent Extension of 2017 Tax Cuts

One of the core components of the One Big Beautiful Bill Act is the permanent extension of the 2017 Tax Cuts and Jobs Act (TCJA). Under current law, many provisions of the TCJA are scheduled to expire in 2025. These include reduced individual income tax brackets, an increased standard deduction, and a corporate tax rate of 21 percent. The new bill would eliminate the sunset clause, making these provisions permanent. Supporters argue that this move provides long-term stability for taxpayers and businesses alike, allowing for better financial planning. Critics, however, warn that the continued revenue reductions could substantially increase the federal deficit over the next decade. According to the Congressional Budget Office, the cost of making the TCJA permanent could add trillions of dollars to the national debt if not offset by spending reductions or alternative revenue sources.

Expansion of the Child Tax Credit

The bill includes a temporary increase to the Child Tax Credit. The current credit, which stands at $2,000 per qualifying child, would be raised to $2,500 through the year 2028. After that, it would return to $2,000. The income phaseout thresholds remain unchanged, and the credit would continue to be partially refundable. This provision is aimed at providing modest additional relief to families with children, though its temporary nature means its long-term effect could be limited. Proponents view the increase as a timely adjustment to support families facing rising living costs. Critics have noted that the credit does not become fully refundable, meaning that some lower-income families may still be ineligible for the full amount.

Deductions for Tips and Overtime Pay

A new provision in the bill would allow federal tax deductions for reported tip income and qualified overtime pay. This would apply to service workers, hospitality staff, and hourly employees in sectors where tips and extra hours contribute significantly to annual income. The deduction would reduce the total amount of taxable income, potentially lowering the overall tax burden for millions of wage earners. Implementation details, such as defining what qualifies as “overtime” and how the IRS would verify tip income, would be established through future regulations. Supporters argue this change would reward hard work and support employees with irregular income. Opponents raise questions about enforcement and whether the deduction could open avenues for underreporting or misuse.

Increase in State and Local Tax Deduction Cap

The bill proposes raising the cap on the State and Local Tax (SALT) deduction from $10,000 to $40,000 for households earning under $500,000 annually. The original cap, introduced in the 2017 tax law, was intended to limit deductions that primarily benefited higher-income taxpayers in states with high local taxes. Raising the cap would restore a significant portion of this deduction for many taxpayers, particularly those in states such as New York, California, and New Jersey. Advocates argue that the increased cap provides relief to middle-class homeowners who faced higher tax liabilities under the current limit. Detractors, however, suggest that the majority of the benefit still flows to higher-income earners, and that this change could reduce federal revenue without addressing inequities in the tax code.

MAGA Savings Accounts for Children

The bill creates a new category of tax-free savings plans called MAGA (Make America Grow Again) accounts. Parents or guardians would be allowed to contribute up to $1,000 per child each year. These accounts would be similar to 529 college savings plans but would cover a broader range of qualified expenses, including tutoring, extracurricular programs, and vocational training. Earnings on these accounts would grow tax-free, and qualified withdrawals would not be taxed. The contribution itself would not be deductible from income taxes. The goal is to encourage savings for child development, particularly outside traditional academic tracks. While many view this as a helpful tool for middle-income families, others question whether the savings benefit will be used equally across income groups, particularly given that lower-income families may lack the disposable income to contribute consistently.

Remittance Tax on International Transfers

The legislation also introduces a 3.5 percent tax on international money transfers, commonly known as remittances. This applies to any funds sent from individuals in the United States to recipients in other countries through banks, wire services, or financial institutions. The bill also includes a provision that would allow Congress to increase the rate up to 15 percent in the future. The intent behind the remittance tax is to generate new federal revenue from funds that typically leave the U.S. economy untaxed. Proponents argue this measure discourages the outflow of money and could reduce fraud related to undocumented labor. Opponents note that the tax could disproportionately affect immigrant families and individuals who support relatives abroad, and that it may disrupt the economies of countries dependent on remittance income.

Business Incentives and International Tax Provisions

The One Big Beautiful Bill Act extends several business tax incentives introduced or enhanced under the 2017 law. These include the continuation of full expensing for capital investments, allowing companies to deduct the full cost of equipment and infrastructure in the year it is purchased. It also maintains full deductibility for research and development (R&D) expenses, a move aimed at boosting innovation. Additionally, the bill retains the current framework for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI), which regulate how U.S. multinationals are taxed on foreign profits. These measures are designed to prevent corporate tax base erosion and incentivize companies to keep operations in the U.S. while remaining competitive abroad. Supporters of these provisions say they promote investment and job creation. Critics argue they continue to favor large corporations and that their economic benefits are difficult to measure in practice.

The Maverick Take

Republican lawmakers argue that the tax provisions in the One Big Beautiful Bill Act offer targeted relief to working families and businesses while promoting economic growth. They emphasize that making the 2017 tax cuts permanent provides consistency and predictability, and that new deductions for tips, overtime, and child expenses help American households keep more of what they earn. The remittance tax is framed by supporters as a way to generate revenue without increasing income taxes on U.S. citizens.

Democrats, on the other hand, raise concerns about the bill’s long-term impact on the federal deficit and its distribution of benefits. They argue that raising the SALT cap and making the TCJA cuts permanent would largely benefit upper-income households, while the remittance tax may unfairly burden immigrant communities. They also point out that many provisions lack full refundability, limiting their effectiveness for lower-income families. From this perspective, the bill represents a continuation of tax priorities that do not adequately address structural inequities.

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