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Budget Reconciliation: Tracking the 2025 Trump Tax Cuts

16 min readBy: Erica York, Garrett Watson, William McBride, Alex Muresianu

Latest Updates

  1. President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025.
  2. This update adds refined modeling results reflecting the amendments made in the Senate to the final version of the One Big Beautiful Bill Act, now passed by both chambers of Congress to be signed by the president.
  3. The One Big Beautiful Bill Act was amended before being passed out of the Senate. 
See Full Timeline

Key Findings

    • Extending the expiring 2017 TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Cuts and Jobs Act (TCJA) would decrease federal tax revenue by $4.5 trillion from 2025 through 2034. Long-run GDP would be 1.1 percent higher, offsetting $710 billion, or 16 percent, of the revenue losses. Long-run GNP (a measure of American incomes) would only rise by 0.4 percent, as some of the benefits of the tax cuts and larger economy go to foreigners in the form of higher interest payments on the debt.
    • President Trump has called for permanent extension of the 2017 tax cuts, additional policies— including no taxes on tips, overtime pay, and Social Security benefits for retirees—as well as creation of a deduction for auto loan interest for American made cars. He has also promised higher taxes on US imports through a series of new tariffs.
    • Lawmakers will use the budget reconciliation process to enact new tax cuts. Reconciliation is a fast-track option that overcomes the Senate filibuster and can be used to enact tax, spending, and debt limit changes outlined in a budget resolution with specified targets or limits for deficit changes within the budget window.
    • Separately from the reconciliation process in Congress, President Trump is imposing tariffs that will raise revenue and reduce economic output.
    • Lawmakers have passed legislation called the “One Big Beautiful Bill Act” to make the expiring tax cuts permanent, provide additional tax cuts and changes to the tax code, and reduce spending.
    • President Trump signed the bill into law on July 4, 2025.

The Latest

  • On July 4, 2025: President Trump signed the One Big Beautiful Bill Act into law.
  • On July 3, 2025: We estimate the Senate-passed version of the “One Big Beautiful Bill” as agreed to by the House would increase long-run GDP by 1.2 percent and reduce federal tax revenue by $5.0 trillion from 2025-2034 on a conventional basis. Dynamic feedback will reduce the revenue loss of by bill by about 19 percent to $4.1 trillion, while spending reductions of nearly $1.1 trillion will reduce the dynamic deficit increase to $3 trillion from 2025-2034.
  • July 1, 2025:  The One Big Beautiful Bill Act bill was amended before being passed out of the Senate.
  • June 30, 2025: We estimate that the Senate Finance Committee’s version of the “One Big Beautiful Bill” would increase long-run GDP by 1.2 percent and reduce federal tax revenue by $5 trillion between 2025 and 2034, on a conventional basis. Combined with the nearly $1.2 trillion in spending reductions estimated by the Congressional Budget Office (CBO), we estimate the Senate version of the OBBB would increase federal budget deficits by nearly $2.9 trillion from 2025 through 2034 on a dynamic basis.
  • June 24, 2025: We estimate that the Senate Finance Committee’s version of the “One Big Beautiful Bill” would increase long-run GDP by 1.1 percent and reduce federal tax revenue by $4.7 trillion from 2025-2034 on a conventional basis after incorporating JCT estimates for items not scored by Tax Foundation, updating our modeling of the SALT pass-through workarounds, and adding proposed changes to the premium tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income rather than the taxpayer’s tax bill directly. , earned income tax credit and child tax credit into our distributional estimates.
  • June 18, 2025: We estimate on a preliminary basis that the Senate Finance Committee’s version of the “One Big Beautiful Bill” would increase long-run GDP by 1.1 percent and reduce federal tax revenue by $4.8 trillion from 2025-2034 on a conventional basis.
  • June 13, 2025: We updated our description of the bill’s changes to spending and revenue to better illustrate the share of revenue losses that are offset by dynamic revenue.
  • June 6, 2025: We updated our analysis of the version of the “One Big Beautiful” bill that passed the House of Representatives. Our estimate of federal tax revenue losses fell back to $4.0 trillion from 2025 through 2034. Our estimate of the long-run GDP effect stayed at 0.8 percent.
  • May 22, 2025: The “One Big Beautiful” bill was amended before being passed out of the House of Representatives. Tax policy changes include a more generous SALT deduction cap, changes to inflation indexingInflation indexing refers to automatic cost-of-living adjustments built into tax provisions to keep pace with inflation. Absent these adjustments, income taxes are subject to “bracket creep” and stealth increases on taxpayers, while excise taxes are vulnerable to erosion as taxes expressed in marginal dollars, rather than rates, slowly lose value. for the alternative minimum tax, accelerated phaseouts and adjustments for IRA green energy credits, a slight increase in the proposed international tax rates, and an expanded limit on itemized deductions, among other smaller changes. The long-run GDP effect increased slightly to 0.8 percent and federal tax revenue losses increased slightly to $4.1 trillion from 2025 through 2034 on a conventional basis.
  • May 13, 2025: We estimate the House GOP’s “One Big Beautiful” tax bill under markup would increase long-run GDP by 0.6 percent and reduce federal tax revenue by $4.0 trillion from 2025 through 2034 on a conventional basis.
  • May 5, 2025: We estimate the tariffs imposed as of May 2025 would raise $2.1 trillion of revenue from 2025 through 2034, while reducing US economic output by 0.8 percent in the long run.
  • April 10, 2025, the House adopted the Senate’s amended version of the budget resolution, which allows $5.3 trillion in deficit-financed tax cuts (the combination of $3.8 trillion of tax cuts assumed to be “costless” under a current policy baseline plus $1.5 trillion in additional deficits permitted), deficit increases of $521 billion on defense and immigration spending, a minimum of $4 billion in spending cuts, and an increase in the debt limit of up to $5 trillion.
  • April 2, 2025, the Senate introduced an updated budget resolution to provide new guidance to its committees on tax and spending policy changes. It adopts the instructions in the House resolution for the House committees while instructing the Senate Finance Committee to make tax policy changes that reduce revenue by up to $1.5 trillion over 10 years against a current policy baseline, which assumes an additional $3.8 trillion in tax cuts. While the $3.8 trillion would not officially score as a deficit increase against a current policy baseline, it effectively permits $5.3 trillion in deficit-financed tax cuts.
    • The Senate resolution gives the Chair of the Senate Budget Committee the ability to revise the numbers using a current tax policy baseline and instructs the Senate Finance Committee to propose an increase in the debt limit by up to $5 trillion.
  • February 25, 2025, the House passed a budget resolution to start the reconciliation process, specifying reductions in taxes and spending over the next decade relative to a current law baseline. The House budget resolution allows a $4.5 trillion increase in the deficit from tax cuts over the next decade so long as spending is cut by $1.7 trillion. If spending is not cut by $1.7 trillion, the cap on tax cuts will be reduced dollar-for-dollar; if spending is cut by more than $1.7 trillion, the cap on tax cuts will be increased by the same.
  • February 21, 2025, the Senate approved its own budget resolution to start the reconciliation process, but it does not permit any tax cuts.

Compare Tax Plans

Details

  • On July 4, 2025: President Trump signed the One Big Beautiful Bill Act into law.
  • On July 3, 2025: The House passed the Senate's One Big Beautiful Bill Act.
  • On July 1, 2025, the One Big Beautiful Bill Act was amended before being passed out of the Senate.
  • On June 27, 2025, the Senate released a new version of the legislative text for the One Big Beautiful Bill (OBBB).
  • On June 16, 2025, the Senate Finance Committee released text for the tax components of the Senate version of the “One Big Beautiful Bill,” which notably includes permanence for major individual and corporate provisions of the TCJA. The Senate amended the bill before final passage on July 1, 2025.

Analysis

  • Our analysis finds the major tax provisions included in the Senate "One Big Beautiful Bill Act" Tax Plan would increase long-run GDP by 1.2 percent, hours worked by 938,000 jobs, wages by 0.4 percent, and the capital stock by 0.7 percent.
  • We estimate the tax provisions would reduce federal tax revenue by $5 trillion between 2025 and 2034, on a conventional basis. On a dynamic basis, incorporating the projected increase in long-run GDP of 1.2 percent, the dynamic score of the tax provisions falls to $4.1 trillion, meaning economic growth pays for 19 percent of the tax cuts.
  • By making key provisions like 100 percent bonus depreciationBonus depreciation allows firms to deduct a larger portion of certain “short-lived” investments in new or improved technology, equipment, or buildings in the first year. Allowing businesses to write off more investments partially alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. and expensing for R&D permanent, the Senate Finance tax bill is a more pro-growth bill that would improve stability, taxpayer certainty, and investment incentives.
  • Combined with nearly $1.1 trillion in spending reductions, we estimate the Senate bill would increase budget deficits by $3 trillion from 2025-2034 before added interest costs. Interest costs would add $725 billion to the 10-year deficit impact, bringing the total deficit increase on a dynamic basis to nearly $3.8 trillion inclusive of additional interest payments due to increased borrowing.
  • The increased borrowing under the bill would reduce American incomes (GNP) by 0.6 percent, creating a wedge between the increase in long-run GDP of 1.2 percent and the increase in long-run GNP of 0.9 percent.

Senate "One Big Beautiful Bill Act" Tax Plan: Topline Analysis

10-Year Conventional Revenue Estimate (Billions)10-Year Dynamic Revenue Estimate (Billons)10-Year Dynamic Deficit Increase Including Spending Cuts (Billions)Long-Run GDPLong-Run GNP

Long-Run Pre-Tax WagesLong-Run Hours Worked Converted to FTE Jobs
-$5,041.3-$4,104.4$3,036.1+1.2%+0.9+0.4%+938,000

See Full Analysis

Related Resources:

    • “Big Beautiful Bill” Senate Tax Plan: Details and Analysis See more
    • The Good, the Bad, and the Ugly in the One Big Beautiful Bill See more
    • The One Big Beautiful Tax Bill: What’s In It, What’s Out See more
    • How Would the Proposed Additional Senior Deduction Compare to No Tax on Social Security? See more
    • Will the Big Beautiful Bill Lead to an Economic Boom or Just Modestly Higher Growth? See more
    • The Senate Finance Committee’s New International Tax Package: A First Look See more
    • A Partial Defense of the QBAI Exclusion See more
    • Senate Softens Blow for Pass-Throughs Using Current SALT Workarounds See more
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What is Budget Reconciliation?

In 2017, Republicans used a procedure called budget reconciliation to pass the TCJA. Democrats used it for the American Rescue Plan Act (ARPA) in 2021, and the Inflation Reduction Act (IRA) in 2022. Reconciliation is a fast-track option to enact tax, spending, and debt limit changes outlined in a budget resolution, notably bypassing a filibuster in the Senate that would otherwise require 60 votes to avoid. Budget reconciliation allows Republicans to rely on a party-line vote for legislation, but they still face slim majorities in both chambers.

Lawmakers can specify targets or limits on reductions or increases in the deficit within the budget window. The “Byrd rule” limits what can be included in a reconciliation bill, disallowing policy changes that don’t affect spending or revenue, and disallowing changes that increase the deficit outside of the budget window. Reconciliation also specifically prohibits changes to Social Security.

What is the Tax Cuts and Jobs Act?

The 2017 Trump Tax Cuts, known as the Tax Cuts and Jobs Act (TCJA), reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system.

At the end of 2025, the individual portions of the Tax Cuts and Jobs Act expire all at once. Without congressional action, 62 percent of filers could soon face a tax increase relative to current policy in 2026. At the same time, the price tag for extending the 2017 Trump tax cuts is in the trillions.

tax Calculator Interactive map TCJA Archives

The Path Forward: Principled, Pro-Growth, Fiscally Responsible Tax Reform

Congress is staring down the expiration of the TCJA, and the Tax Foundation is prepared to provide insight and analysis on the policies at stake. Since its enactment in 2017, the Tax Foundation team has studied the TCJA’s underlying construction and resulting strengths and weaknesses. We have also analyzed fundamental reforms that would dramatically improve the US tax system to support economic growth as well as greater efficiency and simplicity.

Whether lawmakers target fundamental tax reform or follow the outline of the TCJA, they will confront decisions on what to prioritize in this forthcoming round of tax reform. In that regard, staying within the overall TCJA construct, the Tax Foundation team has analyzed difficult, but revenue-neutral ways to build a pro-growth set of reform options that would not significantly worsen the deficit once changes to the economy are considered or substantially change the distribution of the tax burden across the income scale.

Related Resources

One Big Beautiful Bill Pros Cons

The Good, the Bad, and the Ugly in the One Big Beautiful Bill Act

The One Big Beautiful Bill Act makes many of the individual tax cuts and reforms of the TCJA permanent. It improves upon the TCJA by making expensing for R&D and equipment permanent. However, for the most part, it does not include further structural reforms, and instead introduces many new, narrow tax breaks to the code, adding complexity and raising revenue costs.

7 min read
whats in the big beautiful bill tax plan

The One Big Beautiful Tax Bill: What’s In It, What’s Out

Congress is racing to pass the One Big Beautiful Tax Bill before the July 4 deadline. In this episode, Kyle Hulehan and Erica York break down what just happened over the weekend, what’s actually in the bill, and what comes next as the House and Senate try to reconcile their differences.

The One Big Beautiful Bill Explained

The One Big Beautiful Bill, Explained

We break down the House GOP’s One, Big, Beautiful Bill—a sweeping tax package designed to extend key parts of the 2017 Tax Cuts and Jobs Act before they expire in 2026.

Wyden 199a pass-through deduction proposal Democrats proposed to expand child tax credit as part of covid relief package. Analysis of the “SALT Act” state and local tax deduction cap, Restoring Tax Fairness to States and Localities Act, SALT cap repeal, eliminate SALT cap

Growth Should Be a Key Consideration if Corporate SALT Is Limited

Lawmakers should prioritize pro-growth tax policies and use the least economically damaging offsets to make the legislation fiscally responsible. If lawmakers choose to use C-SALT, they should carefully consider the economic trade-off with permanent, pro-growth tax cuts that support investment and innovation in the US.

7 min read

See more  TCJA Archives

Download a printable, one-page overview of the One, Big, Beautiful Bill, below.

Download One-Pager

Featured Experts

Have a question about any of the tax plans or policies above? Contact us to connect with a federal tax policy expert or click on the experts below to request them as a speaker at your upcoming event.

 

  • Erica York Tax Foundation
    Expert

    Erica York

    Vice President of Federal Tax Policy

    Erica York is Vice President of Federal Tax Policy with Tax Foundation’s Center for Federal Tax Policy. Her analysis has been featured in The Wall Street Journal, The Washington Post, Politico, and other national and international media outlets.

  • Garrett Watson Tax Foundation
    Expert

    Garrett Watson

    Director of Policy Analysis

    Garrett Watson is Director of Policy Analysis at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.

  • Alex Muresianu Tax Foundation
    Expert

    Alex Muresianu

    Senior Policy Analyst

    Alex Muresianu is a Senior Policy Analyst at the Tax Foundation, focused on federal tax policy. Previously working on the federal team as an intern in the summer of 2018 and as a research assistant in summer 2020. He attended Tufts University, graduating with a degree in economics and minors in finance and political science.

  • William McBride or Will McBride Tax Foundation
    Expert

    William McBride

    Chief Economist & Stephen J. Entin Fellow in Economics

    Dr. William McBride is the Chief Economist & Stephen J. Entin Fellow in Economics at the Tax Foundation, where he oversees major research projects primarily related to reforming the federal tax code, advancing sound tax policy, and improving the federal government’s fiscal outlook.


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Timeline of Activity

  1. President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025.
  2. This update adds refined modeling results reflecting the amendments made in the Senate to the final version of the One Big Beautiful Bill Act, now passed by both chambers of Congress to be signed by the president.
  3. The One Big Beautiful Bill Act was amended before being passed out of the Senate. 
  4. This update adds refined modeling results, including deficit impacts, of the Senate Finance Committee’s version of the One Big Beautiful Bill Act.
  5. This update adds refined modeling results of the Senate Finance Committee’s version of the One Big Beautiful Bill Act.
  6. This update adds preliminary modeling results of the Senate Finance Committee’s version of the One Big Beautiful Bill Act, introduced by the Committee on June 16.
  7. These updates add refined modeling results of the House-passed One Big Beautiful Bill Act
  8. This update adds analysis of the House amended “One Big Beautiful” bill, which passed the House of Representatives on May 22.
  9. This update adds details on the House GOP’s “One Big Beautiful” tax bill under markup and reflects new tariff estimates.
  10. This update adds details regarding the Trump administration’s tariff actions.
  11. This update provides details on the House adoption of the Senate-amended budget resolution.
  12. This update provides details on the updated Senate budget resolution.
  13. We outline the revenue and economic effects of extending the expiring 2017 Tax Cuts and Jobs Act (TCJA), the policies President Trump called for in his joint address to Congress, and the House and Senate budget resolutions.
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