The One Big Beautiful Bill (OBBB) is now law. Would this author have voted for it? Absolutely.
But here's the obvious question: Why did every Democrat in Congress vote against it, even though the taxes of millions of their constituents will be reduced in 2024 and beyond, avoiding automatic tax hikes scheduled for 2026?
Is opposition to President Trump so blinding that Democratic leadership turned down real benefits for working Americans? If Bernie Sanders had proposed the same provisions, Democrats might have carved him a spot on Mount Rushmore. He’d be touting how OBBB’s tax relief phases out for the wealthy and is targeted squarely at working families.
What OBBB Delivers for Taxpayers
• Higher Standard Deduction: Everyone using the standard deduction will owe less. Seniors get an even larger benefit.
• Tax-Free Overtime and Tips: Deductions of up to $25,000 of tip income and $12,500 ($25,000 for married couples) of overtime income are made available under OBBB, with the benefits phasing out for higher-income taxpayers ($150,000 single, $300,000 joint).
• Expanded Child Tax Credit: More families will qualify for a larger credit.
• Restored SALT Deduction: State and local taxes are now deductible up to $40,000, with phased limits for high earners.
• New Car Deduction: Interest on the purchase of a new car is now deductible.
Without OBBB, none of this would have become law. Instead, many Americans would face automatic tax increases in 2026 as the Trump-era tax cuts expire. For everyday taxpayers—Republican and Democrat alike—OBBB is a win.
Issues That Need Fixing
Like all major legislation, OBBB needs a few clarifications and technical corrections.
1. Abuse of Tax-Free Overtime: Some employers may exploit this benefit by reducing headcount and compensating fewer workers for longer hours. Others might restructure base pay, shifting income into tax-free overtime and ultimately providing benefits to the employer rather than the employee.
The Treasury has the authority to prevent these abuses through regulation, and it should act quickly.
2. SALT Deduction Loophole for Partnerships: A major oversight remains: high-income partners in large partnerships can still circumvent the SALT deduction cap. This undermines fairness. Taxpayers earning the same income should face the same deduction limits, whether the income is from wages or pass-through business income.
Missed Opportunities
Casualty Loss Injustice: Today, only taxpayers in declared disaster zones can claim casualty losses. If two neighbors lose their homes in the same wildfire—but only one lives in the declared area—only that person qualifies for relief. That’s indefensible. A fire is a fire, and the financial loss is the same.
California Wildfires: A Tax Planning Crisis - In fire-ravaged communities, many homeowners are underinsured and/or uninterested in rebuilding due to the lengthy recovery timelines. The best tax planning strategy? Reinvest insurance proceeds, sit on an empty lot, and hold it until death to avoid capital gains.
That’s great tax planning—and terrible community policy. Empty, undeveloped lots could remain for decades, dragging down neighborhoods and property tax revenues.
Congress should fix this by:
- Excluding wildfire insurance proceeds from income;
- Exempting gains on post-wildfire lot sales; and
- Letting new buyers moving into affected areas defer gains on their old homes.
These changes would accelerate rebuilding and restore fire-impacted neighborhoods far more quickly.
Final Thoughts
With or without these improvements, OBBB is a major legislative win, one that lowers taxes for millions of Americans. The support in Congress may have been one-sided, but the benefits are not.
Lower taxes for working families. That shouldn’t be a partisan idea. But thanks to President Trump, it’s now the law.