Seven key impacts of the One Big Beautiful Bill Act!
On July 3, 2025, Congress passed, and on July 4th, the President signed into law the “One Big Beautiful Bill Act” (OBBBA), a sweeping fiscal package aimed at tax reform, business incentives, and federal budget adjustments. While broad in scope, the bill contains several provisions that could have material implications for investors and the general public.
Corporate Tax and Capital Investment Provisions
What’s in the bill:
- Extension of the 2017 corporate tax cuts (21% flat rate preserved).
- Immediate expensing for qualified equipment and machinery (Section 168(k)).
- Expanded R&D deductions under IRC §174.
- Increased interest expense deductibility (from 30% to 50% of EBITDA for qualifying firms).
Implications:
These changes aim to improve after-tax cash flow and reduce the cost of capital for many businesses. Sectors with large capital expenditures – such as industrials, technology hardware, and energy – are positioned to benefit most.
Fiscal Expansion/Federal Debt Increase
What’s in the bill:
The Congressional Budget Office (CBO) projects that the OBBBA will add approximately $2.8 trillion to the federal debt over ten years. This results from revenue reductions not fully offset by spending cuts.
Implications:
Rising deficits may lead to upward pressure on long-term Treasury yields. A higher interest rate environment could compress equity valuation multiples, particularly for growth stocks with high duration cash flows.
Healthcare/Social Program Reductions
What’s in the bill:
The legislation includes phased reductions in federal Medicaid reimbursements and tighter eligibility criteria over the next decade. No direct changes were made to Medicare or the Affordable Care Act marketplaces.
Implications:
Hospitals and managed care providers with significant Medicaid exposure may experience margin compression. Conversely, companies focusing on private-pay services or those with diversified payer mixes may be insulated.
Clean Energy Tax Credit Rollbacks
What’s in the bill:
The bill sunsets or scales back several provisions from the Inflation Reduction Act, including:
- Section 45 Production Tax Credits (PTC) for wind.
- Section 48 Investment Tax Credits (ITC) for solar.
- Transferability clauses for clean energy project credits.
Implications:
Reduced federal support could affect the economics of utility-scale renewable projects, especially for smaller developers. Solar module manufacturers and wind turbine suppliers may see slowing order pipelines in the medium term. Or liquefied natural gas (LNG), which may attract alternative infrastructure funding.
New Tax Exclusions
What’s in the bill:
The bill introduces tax exemptions for tips, overtime pay, and car loans. It also introduces an additional standard deduction for some seniors. The law further complicates the tax code with new rules, conditions, and guardrails. The cost of complying may outweigh any benefit to taxpayers.
Implications:
These four modifications to the tax code are estimated to cost 350 billion over the four years they are in effect. The impact will be much higher if they are made permanent.
New Savings Vehicle
What’s in the bill:
The bill introduces a new savings vehicle, being nicknamed a “Trump Account”. This new type of savings account comes with a $1000 government-provided deposit to accounts set up for children born in the next four years. This new savings account allows contributions up to $5000/year (indexed for inflation) that grow tax-free until the child turns 18.
Implications:
These accounts are supposed to act similarly to a traditional IRA. However, contributions to these accounts will not be tax-deductible. Unlike a traditional IRA, there is no income requirement for the contributions before they are 18. Additionally, withdrawals after they are 18 will be taxed at the generally lower capital gains rate instead of as income. Investments will grow tax-free.
Mixed Impact on Consumer Demand
What’s in the bill:
The bill modifies the Child Tax Credit and Earned Income Tax Credit, resulting in net reductions in refundability for low-income households.
Simultaneously, it retains itemized deduction caps and adjusts standard deductions for inflation.
Implications:
Consumer spending patterns may shift modestly, with potential headwinds in segments reliant on discretionary spending by lower-income households. High-end retail, travel, and services are less likely to be impacted.
Stay Informed!
The One Big Beautiful Bill Act is one of the most comprehensive fiscal packages enacted in recent years. While it aims to spur private investment and business formation, the long-term market effects will depend on macroeconomic feedback, especially interest rate reactions and investor sentiment on fiscal discipline.
