Permanent House Tax Cuts Come with $5.2 Trillion Price Tag
The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) have released new and updated analyses of the tax portions of the One Big Beautiful Bill Act (OBBBA). These analyses account for several last-minute changes made before the bill's passage and also show the deficit impact of extending some of the temporary provisions in the bill. The latest analyses show that the deficit impact of the tax provisions in OBBBA remains almost $3.8 trillion, and that if its temporary provisions are made permanent, the price tag would rise to $5.2 trillion.
Tax provisions in the OBBBA were initially projected to decrease revenues by $3.8 trillion over the next decade. Shortly before passage, the House Rules Committee amended the bill, making significant changes to certain provisions which – on net – canceled out from a deficit impact perspective. Among the changes were modifications to the clean energy credits that the bill phases out, an expansion of the state and local tax (SALT) deduction, and a tightening of the Alternative Minimum Tax. We also received estimates of previously unassessed provisions, like changes to de minimis shipping laws and to certain health insurance provisions, which decreased deficit projections.
The JCT analysis takes into account the fact that timing gimmicks in the tax provisions of the OBBBA set up a large fiscal cliff in 2028. This JCT score shows that extending the bill’s temporary provisions would increase the deficit impact of the tax title of the bill by nearly $1.5 trillion. When added to our estimate of making the Opportunity Zones tax break permanent, this would entail a total deficit impact of $5.2 trillion over a decade.
Tax Policies in OBBBA Would Add Trillions to Deficits
| Policy | Ten-Year Deficit Increase /Decrease (-) Billions FY 2025-2034 |
|||
|---|---|---|---|---|
| Initial Score | Score as Passed | Change | If Permanent | |
| Extend & Expand Rate Cuts | -$2,177 | -$2,177 | -- | -$2,177 |
| Extend AMT Repeal for Taxpayers with Income Below $1 Million | -$1,414 |
|
$110 |
-$1,304 |
| Extend & Expand Standard Deduction Hike | -$1,308 | -$1,308 | -- | -$1,450 |
| Repeal Personal/Dependent Exemption | $1,870 | $1,870 | -- | $1,870 |
| Extend & Expand Child Tax Credit Increase | -$797 | -$797 | -- | -$866 |
| Extend & Expand 199A Pass-Through Deduction | -$820 | -$820 | -- | -$820 |
| Extend & Expand Estate Tax Cut | -$212 | -$212 | -- | -$212 |
| Extend $10,000 SALT, Increase to $40k Below $500k Income; Limit Workarounds | $916 | $787 | -$129 | $916 |
| Extend Other Deduction Changes and Pease Repeal | $21 | $21 | -- | $47 |
| Limit Value of Itemized Deductions to 35% Rates | $41 | $41 | -- | $41 |
| Subtotal, Extend & Expand TCJA Ind Provisions | -$3,880 | -$3,900 | -$19 | -$4,110 |
| Revive Bonus Depreciation through 2029 | -$37 | -$37 | -- | -$365 |
| Revive Domestic R&E Expensing through 2029 | -$23 | -$23 | -- | -$142 |
| Revive Looser Interest Limit through 2029 | -$40 | -$40 | -- | -$60 |
| Extend Lower International Rates, With Modifications | -$174 | -$165 | $9 | -$165 |
| Extend & Expand Opportunity Zones through 2033 | -$5 | -$5 | -- | -$45 |
| Subtotal, Revive TCJA Business Provisions | -$278 | -$270 | $9 | -$777 |
| No Tax on Tips Through 2028 | -$40 | -$40 | -- | -$112 |
| No Tax on Overtime Through 2028 | -$124 | -$124 | -- | -$339 |
| Higher Senior Standard Deduction through 2028 | -$72 | -$66 | $6 | -$166 |
| No Tax on Car Loans through 2028 | -$58 | -$58 | -- | -$182 |
| Health Savings Account Expansions | -$44 | -$44 | -- | -$44 |
| Establish "Trump Accounts", Fund Through 2028 | -$17 | -$17 | -- | -$37 |
| Scholarship Tax Credit | -$20 | -$20 | -- | -$47 |
| Non-Itemizer Charitable Deduction | -$7 | -$7 | -- | -$17 |
| Other Individual Tax Cuts | -$21 | -$21 | -- | -$38 |
| Allow Expensing of Factories through 2028 | -$148 | -$148 | -- | -$306 |
| Extend Clean Fuel Tax Credit through 2031 | -$45 | -$45 | -- | -$66 |
| Other Business and Related Tax Cuts | -$68 | -$72 | -$4 | -$75 |
| Subtotal, New Tax Cuts | -$664 | -$662 | $2 | -$1,429 |
| Repeal EV Tax Credits | $191 | $191 | -- | $191 |
| Phase Out Energy, Production, and Manufacturing Credits | $237 | $249 | $12 | $249 |
| Repeal or Reform other IRA Credits | $131 | $131 | -- | $131 |
| Foreign Corporate Retaliation Tax | $116 | $116 | -- | $116 |
| Reduce ACA Overpayments and Payments to Immigrants | $219 | $237 | $18 | $181 |
| De Minimis Shipments Modification | -- | $39 | $39 | $39 |
| Expand Executive Compensation Deduction Limit | $19 | $19 | -- | $19 |
| Increase College Endowment Tax | $23 | $23 | -- | $23 |
| Impose Remittance Excise Tax | $22 | $26 | $4 | $22 |
| Other Revenue Provisions | $45 | $48 | $3 | $48 |
| Subtotal, Offsets | $1,004 | $1,079 | $76 | $1,079 |
| TOTAL | -$3,819 | -$3,754 | $64 | -$5,236 |
| Memo: As a Percent of Gross Domestic Product | -1.1% | -1.1% | -1.5% | |
Source: Joint Committee on Taxation, Congressional Budget Office & CRFB estimates. Figures may not sum due to rounding.
Prominent legislative changes between the Ways & Means Committee mark up and House floor passage include changing the SALT cap from being a $30,000 cap that phases out above $400,000 in income to being a $40,000 cap that is retroactive to this year, grows at 1 percent per year, and phases out above $500,000 in income, which increased the deficit impact by $129 billion. Nearly balancing this change, the bill modifies the level at which the Alternative Minimum Tax begins to affect taxpayers, saving $110 billion in revenue. The late legislative changes to the energy tax credits will reduce the deficit impact by $12 billion by speeding up the expiration of certain credits while extending the life of nuclear energy credits, relative to the previous version of the bill. In addition, a change to rules about how partnerships may pay their owners will raise $12 billion.
With the OBBBA moving to the Senate, there is still an opportunity to improve the bill by reducing the deficit impact, ridding the bill of timing gimmicks, strengthening spending cuts, and including policies that will set the nation up for strong, sustained economic growth. The reconciliation process was meant to reduce the debt, not increase it. The Ways & Means Committee alone has $50 trillion in deficit reduction options available to offset the deficit increases in its portion of this bill. With our current situation, lawmakers should be focused on at least not making our debt problems worse.
