One Big Beautiful Bill Act

I hope I’ll be a law someday…Oh Yes!

On July 4, President Trump signed the “One Big Beautiful Bill Act” into law after nearly six months of negotiation and deal making to gain approval by majorities in the House of Representative and the Senate. The new law represents a significant legislative overhaul of tax and spending policies under the Trump administration. This report provides an analysis of the bill’s contents, its potential positive and negative effects on the U.S. economy, and its implications for the U.S. stock market.

Contents of the One Big Beautiful Bill Act

The OBBBA is a comprehensive legislative package that extends and expands provisions from the 2017 Tax Cuts and Jobs Act (TCJA) while introducing new tax and spending measures. Below is a detailed breakdown of its key provisions:

Tax Provisions

1. Extension of 2017 TCJA Provisions:
   • Permanently extends lower individual income tax rates, higher standard deductions, and a more generous child tax credit set to expire in 2025 (Investopedia, 2025; CNBC, 2025a).
   • Makes permanent the 20% deduction for pass-through businesses (Section 199A), benefiting contractors, freelancers, and gig economy workers (CNBC, 2025a).
   • Permanently increases the estate and gift tax exemption to $15 million, adjusted for inflation, starting in 2026 (Tax Foundation, 2025b).
     
2. New Tax Deductions:
   • Introduces a temporary federal income tax deduction of up to $25,000 per year on qualified tip income for workers in occupations like hospitality, applicable for tax years 2025–2028, with income limits of $150,000 for individuals and $300,000 for joint filers (CNBC, 2025a).
   • Provides a temporary tax break for overtime pay, aimed at boosting take-home pay for workers (CNBC, 2025a).
   • Offers a $6,000 tax break for older adults earning under $75,000 annually (Livemint, 2025).
   • Raises the state and local tax (SALT) deduction cap from $10,000 to $40,000, benefiting high-income households in high-tax states (Newsweek, 2025).
     
3. Business and Investment Incentives:
   • Makes permanent full expensing for short-lived assets and domestic research and development (R&D), encouraging business investment (Tax Foundation, 2025b).
   • Temporarily allows expensing for qualified structures, with potential for long term economic growth if made permanent (Tax Foundation, 2025b).
   • Permanently raises the threshold for Section 179 expensing, allowing smaller businesses to deduct certain equipment costs (Tax Foundation, 2025b).
   • Introduces tax increases on foreign-headquartered multinational firms and repeals green energy tax credits, affecting sectors like renewable energy (Tax Foundation, 2025a).
     
4. Baby Bonds Program:
   • Establishes a program where parents can contribute up to $5,000 annually to a child’s account, with employers contributing up to $2,500 tax-free. Earnings grow tax-deferred, and withdrawals are taxed as long-term capital gains, aiming to promote wealth-building (CNBC, 2025a).
     
5. Student Loan and Education Provisions:
   • Expands Pell Grant access for low-income students enrolled in short-term, workforce-focused training programs (CNBC, 2025a).

Spending Provisions

1. Defense and Border Security:
   • Increases defense spending, with the administration pushing for an annual defense budget exceeding $1 trillion, benefiting defense contractors like Palantir (Axios, 2025; Livemint, 2025).
   • Boosts funding for border security measures (Reuters, 2025).
     
2. Social Program Cuts:
   • Introduces work requirements for Supplemental Nutrition Assistance Program (SNAP) and Medicaid, aiming to reduce enrollment of able-bodied adults without dependents (White House, 2025).
   • Reduces Medicaid funding, potentially leading to 11.8 million people losing health coverage (Livemint, 2025).
   • Cuts spending on green energy initiatives, including the repeal of a $7,500 electric vehicle tax credit (Axios, 2025).
     
3. Rural Community Support:
   • Invests in rural communities by expanding market access and supporting farm families, aiming to stabilize agricultural sectors (White House, 2025).

Potential Positive Effects on the U.S. Economy and Stock Market

Economic Growth and Consumer Spending

• Short-Term GDP Boost: The Congressional Budget Office (CBO) estimates the bill will increase GDP by an average of 0.5% over the next decade, peaking at 0.9% in 2026 due to increased household income from tax cuts (Tax Foundation, 2025a). The Budget Lab at Yale projects a 0.2% annual GDP growth boost from 2025–2027 (Yale Budget Lab, 2025).
  
• Consumer Spending: Tax deductions for tips, overtime pay, and older adults, along with the permanent TCJA provisions, are expected to increase disposable income, stimulating consumer spending and supporting sectors like retail and consumer goods (CNBC, 2025a; Livemint, 2025).
  
• Business Investment: Permanent expensing for R&D and short-lived assets is projected to boost long-run GDP by 0.7%, encouraging capital investment and innovation (Tax Foundation, 2025b).

Sector-Specific Benefits

• Manufacturing and Defense: Increased defense spending and tax incentives for businesses are likely to benefit manufacturing and defense sectors, with companies like Palantir expected to see gains (Axios, 2025).
  
• Real Estate: The increased SALT deduction cap to $40,000 is expected to benefit high end real estate buyers and professionals in high-tax states, potentially boosting housing markets in those regions (Newsweek, 2025).
  
• Corporate Earnings: Corporate tax cuts and the extension of TCJA provisions are anticipated to enhance corporate earnings, potentially driving stock market gains in sectors like technology and finance (Livemint, 2025).

Stock Market Implications

• Initial Market Optimism: The stock market has shown resilience, with the S&P 500 hitting record highs in 2025, partly due to expectations of tax cuts and economic stimulus (Yahoo Finance, 2025; Seeking Alpha, 2025). Sectors like manufacturing, defense, and technology are expected to benefit, with investors pricing in a “Goldilocks scenario” of sustained earnings growth (Yahoo Finance, 2025).
  
• CFO Confidence: A CNBC CFO survey indicates that 64% of chief financial officers expect the bill to pass and preserve key business tax cuts, fostering a bullish outlook for stocks (CNBC, 2025b).

Potential Negative Effects on the U.S. Economy and Stock Market

Fiscal Concerns and Deficit Growth

• Increased National Debt: The CBO estimates the bill will add $3.3 trillion to the U.S. deficit over 10 years, with publicly held debt rising to 120–124% of GDP by 2034 (Livemint, 2025; Tax Foundation, 2025a). Higher interest payments, estimated at $441 billion over a decade, could offset dynamic revenue gains (Tax Foundation, 2025a).
  
• Credit Rating Risks: Moody’s Investors Service downgraded the U.S. sovereign credit rating in May 2025 due to concerns over the growing $36 trillion debt burden, and further deficit increases could exacerbate this (Livemint, 2025).
  
• Crowding Out Private Investment: Increased deficit borrowing is expected to raise interest rates, with the 10-year Treasury yield projected to rise by 1.2 percentage points by 2054, potentially crowding out private investment and reducing GDP by 0.1% by 2034 (Tax Foundation, 2025a; Yale Budget Lab, 2025).

Social and Sectoral Impacts

• Low-Income Households: Cuts to Medicaid and SNAP, including work requirements, are projected to result in 11.8 million people losing health coverage and a 1.1% income reduction for those earning less than $18,000 annually (Livemint, 2025; CNN Business, 2025a). This could reduce consumer spending among low-income groups, negatively affecting retail sectors.
  
• Green Energy and Electric Vehicles: The repeal of green energy tax credits and the $7,500 electric vehicle tax credit could hinder the renewable energy and EV sectors, impacting companies like Tesla (Axios, 2025).
  
• Housing Market Disparities: While high-income households benefit from the SALT deduction increase, lower-income Americans may face challenges in the housing market due to elevated mortgage rates and economic uncertainty (Newsweek, 2025).

Stock Market Risks

• Bond Yield Pressures: Rising 10-year Treasury yields (from 3.6% in September 2024 to 4.25% in July 2025) could signal reduced market confidence, potentially leading to stock market volatility if yields rise further (Fool.com.au, 2025).
  
• Bubble Risk: Bank of America analysts warn of a potential stock market bubble in the second half of 2025, fueled by tax cuts and anticipated Federal Reserve rate cuts, which could lead to market corrections if investor optimism overshoots fundamentals (Business Insider, 2025a).
  
• Long-Term Concerns: Analysts from Morgan Stanley and Franklin Templeton express concerns that the bill’s deficit growth could negatively impact fixed-income markets and, over time, the stock market due to increased borrowing costs (Reuters, 2025; @DeItaone, 2025).

Critical Analysis and Controversies

The OBBBA has sparked significant debate. Proponents, including the White House and the Council of Economic Advisers, claim it will reduce deficits by over $2 trillion through economic growth and program efficiency, projecting 7.3–10.2% higher real investment and 4.6–4.9% higher real GDP (White House, 2025; @CEA47, 2025; @SecScottBessent, 2025). However, these claims are contested by the CBO and independent analysts, who argue that the bill’s fiscal impact is underestimated and that economic growth projections are overly optimistic (@sahilkapur, 2025; @PeterSchiff, 2025).

Critics highlight the bill’s regressive nature, noting that tax benefits disproportionately favor higher-income households and corporations, while cuts to social programs harm low-income Americans (CNN Business, 2025a; Tax Foundation, 2025a). The repeal of green energy credits and potential tariff policies (not analyzed in this bill) could further complicate long-term economic stability, particularly in the context of global trade tensions (Yahoo Finance, 2025).

Conclusion

The One Big Beautiful Bill Act is a complex piece of legislation with far-reaching implications for the U.S. economy and stock market. Its tax cuts and investment incentives offer short-term economic stimulus and potential stock market gains, particularly in manufacturing, defense, and technology sectors. However, the bill’s significant deficit increases, social program cuts, and sectoral impacts on green energy and low-income households pose risks to long-term fiscal stability and market confidence. Investors should monitor bond yields, interest rate trends, and sector-specific developments to navigate the bill’s impacts. While the bill has been hailed as a political victory for the Trump administration, its long-term economic effects remain uncertain and will depend on implementation, market reactions, and potential future adjustments.

References

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• Fool.com.au. (2025, July 1). How could Trump’s ‘Big Beautiful Bill’ affect the stock market? Retrieved from www.fool.com.au
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• Tax Foundation. (2025a, June 26). Big Beautiful Bill impact: US deficit & economy. Retrieved from taxfoundation.org
• Tax Foundation. (2025b, July 7). One Big Beautiful Bill: Pros & cons: The good, bad, and the ugly. Retrieved from taxfoundation.org
• White House. (2025, June 29). Myth vs. fact: The One Big Beautiful Bill. Retrieved from www.whitehouse.gov
• X Post by @CEA47. (2025, June 25). New CEA analysis of the Senate version of the One Big Beautiful Bill. Retrieved from X
• X Post by @DeItaone. (2025, June 16). Morgan Stanley: Trump-backed bill may hurt growth. Retrieved from X
• X Post by @PeterSchiff. (2025, June 4). Contrary to Trump’s claim, the Big, Beautiful Bill won’t grow the U.S. economy. Retrieved from X
• X Post by @sahilkapur. (2025, June 17). CBO releases a “dynamic” score of the House-passed One Big Beautiful Bill Act. Retrieved from X
• X Post by @SecScottBessent. (2025, June 25). A new report from the Council of Economic Advisors. Retrieved from X
• Yahoo Finance. (2025, July 1). Stock market today: Dow jumps, Nasdaq slides as Trump tax bill sails through Senate. Retrieved from finance.yahoo.com
• Yale Budget Lab. (2025, June 5). Long-term impacts of the One Big Beautiful Bill Act. Retrieved from budgetlab.yale.edu