The One Big Beautiful Bill Act makes many of the individual tax cuts and reforms of the TCJA permanent. It improves upon the TCJA by making expensing for R&D and equipment permanent. However, for the most part, it does not include further structural reforms, and instead introduces many new, narrow tax breaks to the code, adding complexity and raising revenue costs.
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We estimate the One Big Beautiful Bill Act would increase long-run GDP by 1.2 percent and reduce federal tax revenue by $5 trillion over the next decade on a conventional basis.
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The Senate draft overall makes more changes to international tax policy than the House draft. On net the changes are positive.
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Our preliminary analysis finds the tax provisions increase long-run GDP by 0.8 percent and reduce federal tax revenue by $4.0 trillion from 2025 through 2034 on a conventional basis before added interest costs.
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The US Ways and Means Committee’s “Big Beautiful Bill” includes a retaliatory provision called Section 899, along with an expansion of the base erosion and anti-abuse tax (BEAT).
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Tax legislation in 2025 may have good reason to address international corporate income taxes, because of scheduled changes slated to go into effect or because of international developments like the Pillar Two agreement.
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The Tax Foundation uses and maintains a General Equilibrium Model, known as our Taxes and Growth (TAG) Model to simulate the effects of government tax and spending policies on the economy and on government revenues and budgets.
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The agreement represents a major change for tax competition, and many countries will be rethinking their tax policies for multinationals. If there is no agreement on changes to Pillar Two or digital services taxes, retaliatory American tariffs could be on the horizon.
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On tax policy, Harris carries forward much of President Biden’s FY 2025 budget, including higher taxes aimed at businesses and high earners. She would also further expand the child tax credit (CTC) and various other tax credits and incentives while exempting tips from income tax.
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Lawmakers should consider compliance costs—not just tax liabilities—when evaluating reforms to business income taxation.
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President Biden is proposing extraordinarily large tax hikes on businesses and the top 1 percent of earners that would put the US in a distinctly uncompetitive international position and threaten the health of the US economy.
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BEAT is intended to address a legitimate problem, and there are virtues to BEAT’s overall strategic approach; however, its execution leaves room for improvement.
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Lawmakers should aim for policies that support investment and hiring in the United States and refining anti-avoidance measures to improve administrability and lower compliance costs.
The Tax Cuts and Jobs Act of 2017 (TCJA) reformed the U.S. system for taxing international corporate income. Understanding the impact of TCJA’s international provisions thus far can help lawmakers consider how to approach international tax policy in the coming years.
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Lawmakers will have to weigh the economic, revenue, and distributional trade-offs of extending or making permanent the various provisions of the TCJA as they decide how to approach the upcoming expirations. A commitment to growth, opportunity, and fiscal responsibility should guide the approach.
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Policymakers on Capitol Hill should prioritize permanent pro-growth policy in the coming years as the economy struggles with inflation and the recovery from the pandemic.
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Even in the face of a global minimum tax, Congress still has a chance to develop a strategic approach in support of U.S. investment and innovation.
Overall, the data shows outbound FDI shifted from low-tax to other jurisdictions, while inbound FDI remained largely unchanged.
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Congress should prioritize evaluation of recent international tax trends and the model rules and adjust U.S. rules in a way that supports investment and innovation and moves towards simplicity.
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