Budget Reconciliation: Tracking the 2025 Trump Tax Cuts

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

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

Details

• On May 22, the House Rules Committee amended elements of the House Ways and Means legislative text related to SALT, IRA green energy credits, international taxes, the alternative minimum tax, and itemization deductions. The broader bill was passed out of the House of Representatives.
• On May 12, the House Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is the chief tax-writing committee in the US. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. released pre-mark legislative text to extend the expiring 2017 tax cuts and provide additional changes to the US tax system ahead of a markup hearing on May 13.
• The legislative text introduced by the Ways and Means Committee cuts taxes by less than the budget resolution instructions, implying either that spending reductions have fallen short of the target or that lawmakers are leaving room for further negotiations over certain tax items.

Analysis

• On July 3, the House agreed to the Senate amendment of the bill. The analysis below reflects the original House-passed version of the bill.
• Our preliminary analysis finds the tax provisions included in the House reconciliation bill would increase long-run GDP by 0.8 percent, increase hours worked by 983,000 jobs, increase American incomes as measured by GNP by 0.7 percent, increase wages by less than 0.05 percent, and increase the capital stock by 0.2 percent.
• We estimate the tax provisions would reduce federal tax revenue by $4.0 trillion between 2025 and 2034, on a conventional bases. On a dynamic basis, incorporating the projected increase in long-run GDP of 0.8 percent, the dynamic score of the tax provisions falls to $3.1 trillion, meaning economic growth pays for 22 percent of the tax cuts. The bill’s net spending cuts of about $1.5 trillion lead to a combined budget deficit increase of $1.7 trillion over the 10-year budget window on a dynamic basis.
• Overall, the bill would prevent tax increases on 62 percent of taxpayers that would occur if the TCJA expired as scheduled. However, by introducing narrowly targeted new provisions and sunsetting the most pro-growth provisions, like bonus depreciation and research and development (R&D) expensing, it leaves economic growth on the table and complicates the structure of the tax code.

House Big, Beautiful Bill Act Tax Plan: Topline Preliminary Estimates

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Related Resources:

• A More Generous SALT Deduction Cap in the Big, Beautiful Bill Would Cost Revenue and Primarily Benefit High Earners  See more
• House Tax Package Could Double Economic Growth Impact by Prioritizing Permanence for TCJA Business Provisions See more
• Breaking Down the Senior Deduction in the One, Big, Beautiful Bill See more
• ‘Trump Accounts’ Could Be Better. Here’s How. See more
• How the IRA Provisions (and Scores) Have Changed See more
• How Does the House-Passed Tax Bill Change the Section 199A Pass-Through Deduction? See more
• The Remittances Tax: High Paperwork, Low Payoff See more
• How Would the Proposed $4,000 Senior Deduction Compare to No Tax on Social Security? See more
• House “One Big Beautiful Bill” Riddled with Temporary Tax Policy See more
• House GOP’s Approach to the IRA Clean Energy Tax Credits: Five Things to Know See more
• Current Trump Tariffs Threaten to Offset Benefits of Promised Tax Cuts See more
• The One Big Beautiful Bill, Explained Listen now
• State Implications of the One, Big, Beautiful Bill See more
• SALT Cap Workarounds for Some Pass-Through Entities Are Threatened by One, Big, Beautiful Bill See more
• What Are the Goals of Retaliatory Tax Policies? See more
• Three Corporate Tax Hikes That Would Undermine TCJA’s Improvements to Competitiveness See more
• Raising the Top Income Tax Rate Would Offset Economic Benefits of TCJA Individual Permanence See more
• Growth Should Be a Key Consideration if Corporate SALT Is Limited See more

Details

• On the campaign trail, and reiterated in his March 4 joint address to Congress, President Trump called for permanence for the 2017 tax law, restoring the state and local tax (SALT) deduction, reducing the corporate tax rate for domestic production, exempting various types of income from the income tax, repealing green energy tax credits, and imposing steep new tariffs.

Analysis

• Some of Trump’s tax proposals are well-designed and would be efficient ways to promote long-run economic growth, such as permanent expensing for machinery, equipment, and research and development (R&D).
• Some of his tax proposals are poorly designed and would worsen the structure of the tax code while only creating a muted impact on long-run economic growth, such as the exemptions for tips and Social Security income.
• Worse yet, Trump’s reliance on import tariffs to offset the cost of tax cuts come with major downsides. Tariffs are a particularly distortive way to raise revenue, especially as they invite foreign retaliation. We estimate Trump’s proposed tariffs and partial retaliation from all trading partners would together offset more than two-thirds of the long-run economic benefit of his proposed tax cuts.
• During the campaign, we estimated Trump’s tax proposals would increase long-run GDP by 0.8 percent, the capital stock by 1.7 percent, wages by 0.8 percent, and employment by 597,000 full-time equivalent jobs. We also estimated the proposals would increase the 10-year budget deficit by $3 trillion conventionally and $2.5 trillion dynamically.

Trump 2024 Campaign Tax Plan: Topline Preliminary Estimates

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Details

• President Trump has imposed new tariffs on nearly all US trading partners as well as on specific products, affecting more than 70 percent of US imports. While the tariffs are not formally or officially part of the reconciliation context, they will have economic and revenue effects to consider alongside the tax package Congress produces.

Analysis

• The tariffs imposed and scheduled to take effect as of April 2025 would increase federal tax revenue by $2.1 trillion from 2025 through 2034 on a conventional basis and decrease after-tax incomes by 1.2 percent on average.
• Before accounting for foreign retaliation, Tax Foundation estimates the tariffs will reduce long-run US output by 0.7 percent.

Trumps Tariffs: Topline Preliminary Estimates

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Details

• Beginning January 1, 2026, most provisions of the 2017 Tax Cuts and Jobs Act (TCJA) will expire. Additionally, several business provisions have already expired or are phasing out. Without Congressional action, expiration of the individual provisions would increase taxes for 62 percent of taxpayers, while extension will significantly reduce federal revenues over the coming decade.

Analysis

• Over the 2025 through 2034 budget window, permanence for the expiring TCJA individual provisions will reduce federal tax revenue by $3.6 trillion ($3.2 trillion dynamically), the expiring estate tax provisions by $240 billion ($240 billion dynamically), and the expiring business provisions by $648 billion ($351 billion dynamically).
• Long-run GDP would be 1.1 percent higher, offsetting $710 billion, or 16 percent, of the revenue losses.
• The $4.5 trillion reduction in tax revenues would increase the budget deficit and push up interest costs by an estimated $941 billion ($806 billion dynamically). Long-run GNP 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.
• As a result of the tax cuts, after-tax incomes would rise by 2.9 percent (3.4 percent dynamically) in 2026 on average. The share of filers who itemize would drop from 33 percent to 13 percent, and 62 percent of filers would see a tax cut from extending the individual provisions.

TCJA Permanence: Topline Preliminary Estimates