Ensuring and Boosting Minimal Tax Rates for Enhanced American Financial Wealth
President Trump's proposed permanent extension of the Tax Cuts and Jobs Act (TCJA), enacted through the "One Big Beautiful Bill Act" (OBBB) signed on July 4, 2025, is projected to bring substantial economic benefits. The report titled "Preserving-and-Expanding-Low-Tax-Rates-to-Create-American-Economic-Prosperity" outlines these benefits.
The Act makes permanent the reduced individual and business tax rates originally enacted under the TCJA, including keeping the maximum individual income tax rate at 37%, instead of reverting to the pre-TCJA level of 39.6% starting in 2026. It also extends the lower corporate tax rates and enhances the deductibility of certain business expenses, further supporting U.S. businesses and encouraging economic growth.
For households, the bill makes permanent expiring deductions and modifies others, notably extending the $10,000 cap on state and local tax (SALT) deductions with an increased temporary cap of $40,000 for joint filers through 2029. This particularly benefits taxpayers in high-tax states. The Act also expands tax relief measures for workers by exempting qualified tips from federal income tax and allowing overtime pay to be fully deductible starting in 2026, effectively increasing take-home pay.
The Act also preserves homeowner benefits by making permanent the $750,000 mortgage interest deduction limit, which supports the housing market by maintaining favorable incentives for homeownership. Health-related tax provisions are enhanced, including expanded access to Health Savings Accounts (HSAs), allowing millions more Americans enrolled in certain Affordable Care Act plans to contribute to HSAs starting in 2026 and permitting HSA funds to be used for direct primary care memberships.
The Joint Committee on Taxation estimates the extension of TCJA provisions will reduce federal revenue by approximately $2.19 trillion relative to current law over the next decade, with the entire OBBB costing about $3.4 trillion over 10 years, thus increasing federal deficits but aiming to spur economic activity.
The Council of Economic Advisers (CEA) conducted an analysis in April 2025, finding that extending the 2017 Tax Cuts and Jobs Act would avert a $4 trillion tax hike. The CEA finds that the short-run effects over the next four years from the tax cuts would include economic benefits such as increased investment, higher wages, and job creation.
The report also includes the renewal and enhancement of Opportunity Zones (OZ) incentives in distressed areas, promising $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 in the long run.
The proposed tax cuts also include permanent extension of the expiring TCJA business tax cuts, a 15% corporate tax rate for domestic manufacturing, a lower tax rate for foreign-derived intangible income (FDII), and an increase in the section 199A deduction from 20% to 23%.
The CEA's analysis also showed that extending the TCJA would continue the legacy of President Trump's first term, during which Americans experienced record high income gains, record low poverty, and low inflation. The temporary tax cuts include full expensing for new factories for four years, 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.
In summary, the proposed tax cuts are designed to preserve and expand the low-tax rate environment created by the original TCJA to promote economic prosperity, particularly through increased consumer spending, investment, and job growth. However, these benefits come with significant increases in federal deficits over the next decade. The projected economic benefits include greater after-tax income for individuals, sustained lower business tax rates to encourage investment and hiring, enhanced incentives for homeownership, and expanded healthcare savings options. The Act also aims to support workforce growth in poor communities, especially in rural areas.
- The permanent extension of the Tax Cuts and Jobs Act (TCJA) in the One Big Beautiful Bill Act (OBBB) will further support U.S. businesses, as it maintains lower corporate tax rates and increases the deductibility of certain business expenses.
- The proposed tax cuts, including the extension of TCJA business tax cuts, such as the 15% corporate tax rate for domestic manufacturing and the increase in the section 199A deduction, aim to spur economic activity and encourage investment and hiring across various sectors.
