By Jessica I. Marschall, CPA
June 13, 2025
In a year marked by electoral shifts and budgetary uncertainty, the House of Representatives has passed a sweeping $2.4 trillion tax bill, entitled the One Big Beautiful Bill. Designed to fulfill campaign promises made by President Donald Trump, the bill combines extensions of the 2017 Tax Cuts and Jobs Act (TCJA) with new populist carve-outs, including the much-publicized “no tax on tips” provision. While pitched as middle-class relief, the bill’s structure is deeply regressive, offering disproportionately large benefits to high-income earners while reducing resources for low-income households.
This article provides a comprehensive overview of the bill’s key provisions, assesses its impact across income levels, and explains why many economists view the proposal as a costly political gesture with minimal return in terms of economic growth or equity.
1. Core Individual Tax Extensions
At the heart of the 2025 bill is the permanent extension of the TCJA’s individual tax cuts, originally set to expire in 2025. These include:
- Lower marginal tax rates across brackets
- A doubled standard deduction ($16,000 for individuals, $32,000 for married couples)
- Expanded Child Tax Credit
- Repeal of personal exemptions (continuation)
- Revised inflation adjustment using chained CPI
These provisions, which together account for the bulk of the bill’s cost, maintain the post-2017 framework for personal income taxes. Supporters argue that extending the TCJA structure prevents an effective tax hike on middle-income families. However, critics point out that this move alone could cost over $3.5 trillion over ten years, per estimates from the Committee for a Responsible Federal Budget and the Tax Policy Center.
The extension of the individual rate cuts offers predictability but continues the underlying inequities of the 2017 framework. As in the TCJA, the greatest dollar benefits accrue to upper-middle-income households and the wealthy, who have more taxable income to shield.
2. Populist Additions: Overtime, Tips, and Senior Deductions
The 2025 bill includes several populist carve-outs championed by President Trump:
• No Tax on Tips
This provision exempts all tip income from federal income taxes, in addition to the standard deduction. While it polls well and is framed as a boost for service workers, analysis shows it disproportionately benefits higher-income tipped workers, such as casino dealers and high-end bartenders, while offering little to low-wage employees who already earn below the standard deduction. According to The New York Times (Parlapiano & Duehren, June 4, 2025), 37% of tipped workers currently owe no federal income tax, meaning they gain nothing from the exemption but still owe payroll taxes and state income taxes depending upon their domicile state.
Moreover, because the legislation tasks the Treasury with defining which jobs qualify as “traditionally tipped,” the provision opens the door to intense industry lobbying from gig platforms like Uber and DoorDash seeking to reclassify their workers’ earnings.
• Overtime Pay Deduction
The bill also exempts overtime earnings from federal income tax. Like the tip provision, this introduces new inequities—two workers earning the same annual income could owe vastly different tax amounts depending on whether their pay includes overtime. Additionally, for salaried employees or those in industries where overtime is unavailable, there is no corresponding benefit.
• Senior Tax Credit
A new deduction for seniors offers limited relief but adds another layer of complexity. Like the tips deduction, it functions as a non-refundable benefit and does not address payroll taxes or provide meaningful assistance to the lowest-income seniors who already owe little or no income tax.
3. Corporate and Business Provisions: Shrinking the Growth Footprint
While the 2017 tax law focused heavily on corporate tax rate reductions (from 35% to 21%), the 2025 bill includes relatively modest extensions of business-friendly provisions, many of which are temporary:
- Bonus depreciation extended through 2026, with a phase-down beginning in 2027
- Research and Development (R&D) expensing preserved but not expanded
- Pass-through deduction (Section 199A) extended, but without reform to target it toward actual reinvestment or job creation
- Qualified business income (QBI) deduction retained, including service-based pass-through entities
Economists have noted that these provisions could support growth, but their limited duration and budget constraints dampen their impact. According to The Washington Post (Jeff Stein, June 9, 2025), the conservative Tax Foundation estimates this bill would increase GDP by just 0.8%, roughly half the growth projected under the 2017 TCJA despite costing significantly more.
As Don Schneider, former chief economist for the House Ways and Means Committee, noted, “[These] are some of the best growth that tax policy can deliver… but they’re not devoting a ton of new resources to new policies—this is mainly an exercise in extensions.”
4. Estate Tax and SALT Deduction Changes
The bill makes several additional changes with significant fiscal consequences but limited economic return:
- Estate tax threshold increased to $15 million per individual, $30 million per couple
- Partial repeal of the SALT (State and Local Tax) deduction cap, especially benefiting high-income households in states like New York and California
These provisions do not incentivize new investment or economic activity, and instead reflect traditional Republican priorities now framed in populist packaging. The estate tax change, for example, benefits fewer than 0.1% of estates while reducing federal revenues by tens of billions.
5. Retroactive Tax Cuts and Political Timing
Several elements of the bill are retroactive, applying to income earned in 2024 or earlier. These include:
- Retroactive deduction for 2024 tips and overtime
- Retroactive business expense deductions
- Expanded child tax credit retroactive to January 2024
Retroactive tax relief does nothing to change behavior, making it ineffective as a stimulus. Economists broadly agree that tax incentives work only when they influence future decisions, such as hiring, investment, or increased labor participation. As Schneider and others have noted, “[retroactive cuts] are not pro-growth.”
6. Regressiveness in Structure and Outcome
According to a June 12, 2025 New York Times analysis of Congressional Budget Office (CBO) data, this bill is the most regressive major tax or entitlement law in decades. The CBO’s distributional analysis estimates the top 10% of earners will see a 2.3% annual increase in after-tax income, while the bottom 10% will lose 3.9% between 2026 and 2034.
Annual Average Change in After-Tax Income (2026–2034):
- Bottom 10%: −3.9%
- 10th–20th percentile: −1.2%
- 20th–30th percentile: −0.4%
- Middle 40%: ranges from +0.1% to +1.1%
- Top 10%: +2.3%
Real-world examples further highlight this disparity:
- Casino dealer earning $100,000 ($60,000 in tips) would save $10,753 in taxes annually.
- Low-income worker earning $18,500 (wages + tips) would save less than $250, while losing ACA subsidies or Medicaid coverage.
- High-income taxpayer earning $850,000 (mixed sources) could save $30,000–$50,000/year from the pass-through extension, estate tax shield, and reduced top marginal rates.
These outcomes invert historical patterns. Most major tax bills in the last 40 years either benefited all groups (e.g., 2001 Bush tax cuts) or delivered the greatest benefit to lower-income households (e.g., 2021 American Rescue Plan). The 2025 bill not only reduces benefits to the poor but shifts more resources to the wealthy while adding to the deficit.
As the New York Times notes, “We just don’t usually have big tax cuts running in different directions from the bottom than at the top.”
7. Budget Impact and Fiscal Outlook
The cumulative cost of the bill—estimated at $2.4 trillion over 10 years—adds significantly to the federal deficit at a time when debt-to-GDP is already nearing post-war highs. Even Republican-friendly economists have raised concerns.
Unlike in 2017, where tax cuts were marketed as self-financing via growth, the current proposal lacks a plausible economic return large enough to offset the revenue loss. Furthermore, the bill’s temporary corporate provisions and permanent individual cuts create policy asymmetry: lasting reductions in government revenue with no clear strategy to finance them beyond political messaging.
8. Conclusion: A Political Bill, Not an Economic One
The 2025 House Republican tax bill is more than a tax policy—it is a political document. It fulfills campaign rhetoric, rewards favored constituencies, and reframes the Republican tax agenda away from corporate efficiency and toward direct household relief. But it does so at the expense of fiscal responsibility, tax neutrality, and upward mobility.
By delivering large permanent tax breaks to the wealthy while offering temporary, shallow, or illusory benefits to the working class, the bill rewrites the social contract at the heart of U.S. tax policy. It abandons the principle that those with greater ability to pay should carry a fairer share—and does so in a time of record deficits and stable economic conditions.
As a CPA and tax policy analyst, I urge policymakers and the public alike to move beyond headlines and rhetoric. Tax policy should be about economic growth, fairness, and sustainability—not political expedience.
Jessica I. Marschall, CPA
President & CEO, The Green Mission Inc.
IRS Qualified Appraiser | Tax Strategy Consultant
June 13, 2025
Sources:
- Bipartisan Policy Center: What’s in the 2025 House Republican Tax Bill?
- The New York Times, June 4, 2025: Who Really Benefits From ‘No Tax on Tips’?
- The New York Times, June 12, 2025: Trump’s Big Bill Would Be More Regressive Than Any Major Law in Decades
- The Washington Post, June 9, 2025: Trump Tax Bill Reveals Striking Shift in GOP’s Focus
- Tax Foundation: 2025 Tax Reform Economic Forecast
- Congressional Budget Office: Distributional Effects of the 2025 Tax Bill
