TEMPO.CO, Jakarta - The United States Senate approved President Donald Trump's proposed Tax Cut and Spending Reduction Bill on Tuesday, July 1, 2025. Known as the "One Big Beautiful Bill," the legislation will now proceed to the House of Representatives for further consideration.
If passed, the bill would represent a major shift in Trump’s fiscal policy. It includes $4.5 trillion in tax cuts along with $1.2 trillion in budget reductions, targeting areas such as border security, military defense, and national energy projects.
The bill also proposes to extend the tax reductions introduced under the Tax Cuts and Jobs Act of 2017, which are set to expire at the end of this year.
According to Investopedia, the One Big Beautiful Bill Act (OBBBA) is a budget reconciliation package that combines various proposals related to government spending, revenue, and debt. The 2025 version covers the federal budget, new tax breaks, and an increase in the U.S. debt ceiling.
The Congressional Budget Office has noted that the bill’s benefits primarily favor high-income groups. Meanwhile, programs that serve lower-income individuals, such as Medicaid and Supplemental Nutrition Assistance Program (SNAP), are set to face funding cuts.
The bill also proposes the shutdown of the government’s free tax-filing website.
Individual Tax Incentives
The Tax Foundation reports that the bill extends several provisions from the 2017 Tax Cuts and Jobs Act while adding new deductions for the 2025–2028 tax years. Key proposals include:
An increase in the child tax credit from $500 to $2,500
Higher standard deductions: $1,000 for single taxpayers, $1,500 for heads of households, and $2,000 for married couples
New deductions for tips, overtime, car loan interest, non-itemized donations, and elderly care expenses
A tax credit for donations to scholarship-granting organizations from 2026 to 2029
The bill also introduces a pilot program called "MAGA Accounts," offering a $1,000 incentive for newborns. However, this measure has drawn criticism for being narrowly targeted and administratively burdensome. All individual provisions are scheduled to expire by the end of 2028.
Business Tax Reform
For businesses, the bill includes temporary incentives such as full expensing for domestic machinery, research and development, and building construction in key sectors like manufacturing, agriculture, and natural resource extraction.
These benefits apply only to projects that begin before January 1, 2029, and are operational by 2033, limiting their potential to spur long-term investment.
The bill also proposes a return to pre-2022 methods for calculating business interest deductions. In addition, several incentives under the Inflation Reduction Act (IRA) are set to be reduced or removed. Among them:
Tax credits for electric and hydrogen vehicles would end after 2025
Credits for zero-emission energy production would be scaled back between 2028 and 2032
Clean fuel production credits would only be extended until 2031
Critics argue that these temporary policies risk reviving so-called "zombie provisions"—benefits that are meant to expire but are repeatedly extended by Congress. While a few aspects of the bill are permanent, most are short-term and complex.
According to several tax policy analysts, this lack of long-term clarity undermines legal certainty and limits the bill’s ability to support sustained economic growth.
Adinda Jasmine also contributed to the writing of this article.
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