In fact, when the final draft of the bill came out of Committee in the House the Joint Committee on Taxation and the Congressional Budget Office (allegedly non-partisan sources of economic data) “scored” the bill as having a “zero” impact on the growth of the economy.
However, the Council of Economic Advisers has conducted two studies of the core tax provisions of the bill, including:
• Permanent extension of the expiring TCJA business tax cuts;
• Permanent full expensing for equipment;
• Permanent full expensing for research and development (R&D);
• Permanent additional rate cuts for businesses, namely:
o A 15 percent corporate tax rate for domestic manufacturing and equivalent reductions for
pass-through manufacturing activities;
o A lower tax rate for foreign-derived intangible income (FDII);
o An increase in the section 199A deduction from 20 percent to 23 percent;
• Temporary full expensing for new factories (for four years);pass-through manufacturing activities;
o A lower tax rate for foreign-derived intangible income (FDII);
o An increase in the section 199A deduction from 20 percent to 23 percent;
• Extension and strengthening of individual tax relief from the TCJA;
• No income tax on overtime, no income tax on tips, and tax relief for seniors; and
• Renewal and enhancement of Opportunity Zones (OZ) incentives in distressed areas.
The CEA found the following short-run effects over the next four years from the tax cuts:
• 9.8 to 14.5 percent higher investment;
• 4.2 to 5.2 percent higher GDP (in real levels);
• 6.6 to 7.4 million full-time equivalent (FTE) jobs saved or created.
In the long run, with effects gradually building up over the next four years and beyond:
• Higher investment and GDP (4.9 to 7.5 percent and 2.9 to 3.5 percent, respectively);
• 4.2 million more FTE jobs;
• $6,100 to $11,600 higher wages per worker;
• $7,800 to $13,300 higher take-home pay for a typical family with two children; and
• $100+ billion of investment, 1+ million jobs, and hundreds of thousands of new homes to support workforce growth in poor communities, especially in rural areas.
The tax package as a whole not only averts the potential recessionary impact of a historic tax hike, it additionally provides for long-term economic growth, job creation, and higher pretax wages and after-tax incomes for American families. Although the CEA studies do not explicitly study the impact of the tax package on inflation dynamics, the heavy emphasis on supply-side incentives and the experience of low inflation following passage of the TCJA during the first Trump Administration suggests that the current tax package will lay a strong foundation of non-inflationary growth and greater affordability.
In the first few years after the passage of the TCJA in 2017, real household income for the typical (median) family rose by $6,400—including the largest one-year jump ever recorded by the Census Bureau, occurring in 2019—wage growth accelerated, especially for those on the lower rungs of the economic ladder, and poverty reached record lows across every demographic group (CEA, 2021).
The CEA finds that, relative to what would transpire if the expiring provisions of the TCJA are not extended, continuing the low tax rates for businesses will lead investment to be 1.6 to 3.5 percent higher in both the short run and the long run. Increased investment leads to a rise in the level of real GDP of 0.1 to 0.3 percentage points in the short run. Over the long run, the boost to GDP is even larger, at 0.4 to 0.9 percentage points, as the added investment gradually grows the stock of productive capital in the economy.2 The CEA estimates that long-run real wages will be $2,581 to $4,430 higher.
These further rate reductions for businesses are crucial to the real wage growth for families. The more generous section 199A deduction that appears in the One Big Beautiful Bill approved by the House Ways and Means committee further aids small manufacturing businesses along with small pass-through businesses in other sectors of the economy.
The CEA estimates that the marginal impact of including the further rate reductions on top of the previously analyzed provisions is to raise investment by 0.6 to 0.8 percent and the level of real GDP by up to 0.1 percent in the short run and 0.2 percent in the long run. The boost to wages is considerably higher, with workers seeing paychecks increase by $2,145 to $4,596 in the long run.
Looking at the cumulative impact of all the business tax provisions thus far analyzed, the CEA found that investment is 4.9 to 7.5 percent higher, the level of real GDP is 0.4 to 0.6 percent higher in the short run and 1.1 to 1.8 percent higher in the long run, and long run real wages are higher by $6,100 to $11,627.
No doubt $6,100 to $11,627 is peanuts to the self-appointed elite in DC’s media and politics swamp, but to working families outside the Beltway in real America that money makes a genuine difference in their quality of life – it’s the difference between staying home and keeping the old clunker or going on a family vacation and financing a new car. So, it’s time for Republicans to show whose side their on and get the bill passed.
- Big Beautiful Bill
- Freedom Caucus
- Conservative Holdouts
- Rep. Chip Roy
- Art of the Deal
- Josh Brecheen,
- Andrew Clyde,
- Ralph Norman,
- Lloyd Smucker (Pa.)
- Committee Review
- SALT tax
- Blue State taxes
- Medicaid cuts
- illegal immigrants eligibility
- Rep. Ken Calvert
- Senator Josh Hawley
- Energy subsidies
- Work requirements
