The House of Representatives Advances H.R. 1, the One Big Beautiful Bill Act

Early Thursday morning, on a vote of 215–214, the House of Representatives passed H.R. 1, the One Big Beautiful Bill Act, which will extend the Tax Cuts and Jobs Act (TCJA) of 2017 in addition to setting spending and enacting a host of domestic policies priorities. The bill will now continue its journey to becoming law in the Senate, where it will almost certainly undergo further revisions.

The most important aspect of the package is TCJA extension. As the Taxpayers Protection Alliance (TPA) has been shouting from the rooftops, providing continued tax relief is essential to ensuring that American businesses have a competitive environment in which to operate, and that American businesses and individuals are not weighed down by oppressive tax burdens. The bill would extend the lowered 2017 rates for individuals and the lowered standard deduction and would otherwise simplify the tax filing process for individuals.

For businesses, the House-passed package would provide critical tax reform on business interest and research & development expenses. These sorts of pro-growth reforms were at the heart of the economic boom instigated by the TCJA and providing them in the future will ensure that American businesses can make the most of their capital and financial resources to drive further prosperity and growth.

The House would also end the Direct File program, an extra-statutory program run by the Internal Revenue Service. TPA has long argued that Direct File — which would provide a federally run online tax-filing platform — would be both costly and bad policy.

The legislation would also end tax credits for green energy established by the fallaciously named Inflation Reduction Act (IRA). Besides bleeding revenue, these incentives distorted energy markets and caused American businesses to invest in otherwise-unprofitable industries. To further combat Biden-era Moreover, the bill would further work requirements for Medicaid.

Significantly, the legislation would reform compensation plans for pharmacy benefit managers (PBM) involved in Medicare programs. It would tie PBM compensation to flat rates and prevent the waste of taxpayer dollars that has become so common in these programs.

There are, however, certain provisions that TPA urges the Senate to consider and remove, such as those exempting tipped wages and overtime pay from taxation. While these proposals have some facial appeal, they needlessly complicate the tax code and distort incentives for employers and employees alike. More importantly, there is no reason that these sorts of income are more worthy of tax relief than any other. For example, it is difficult to think of why a waiter at a restaurant should receive greater tax relief than the cooks in the kitchen.

In the same vein, the package would create a deduction for auto loan interest. This acts as a subsidy of a sort for auto loans, which encourages people to take out loans — not to mention the fact its negative revenue impact. Americans’ decision making about whether to buy vehicles and how to pay for them should be driven by individuals’ personal financial situations and undistorted market prices, not federal subsidies.

The package would also raise the cap for the State and Local Tax Deduction (SALT) to $40,000, another bad policy TPA has warned against. Higher SALT caps subsidize the bad policies of high-tax states at the expense of everyone else. One of the central merits of America’s federalism is that it allows different states to experiment with different policies and attempts to use the federal government to cushion the blow of bad state policy undercuts the logic and functioning of the system.

Other concerns swirl around the effects of this package. Far from being fiscally conservative, the Congressional Budget Office (CBO) says the package will add $3.8 trillion to the deficit over a decade. It would also raise the debt limit by $4 trillion. This is particularly concerning as the National Debt nears $36 trillion and annual deficits run into 13-figure sums. Interest payments are now more costly than any program besides Social Security, and if interest rates rise (as they likely will), tens of trillions of dollars will be added to CBO projections.

This is unsustainable. Even as it pursues other critical policies like extending the TCJA, Congress must take responsibility and put a stop to out-of-control spending. Only budget cuts — not increased revenues or economic growth — can pull the U.S. out of the fiscal hole it has dug for itself. In fairness, mandatory spending (including some of the biggest line items, such as Social Security) are off the table in the reconciliation process, the constraints under which Congress now works.

In the final analysis, there is much to like about the package passed by the House. Extending the TCJA is critical to ensuring America’s future prosperity, and TPA full-throatedly commends lawmakers for furthering this goal. Ending the IRA’s destructive subsidies for green energy is also crucial. But the bill also overlooks the necessary rightsizing of the federal government’s spending that is no less crucial to preventing economic stagnation and crisis.