The One Big Beautiful Bill Is Law—Now What?

The One Big Beautiful Bill is now law—but what does it actually do? In this episode, we break down the new tax law’s key provisions, including who benefits, who doesn’t, and what it means for the economy, tax certainty, and the federal deficit. 

Kyle Hulehan is joined by Daniel Bunn, President and CEO of Tax Foundation, and Garrett Watson, Director of Policy Analysis. Together, they dive into the bill’s temporary vs. permanent changes, its international implications, and how it sets the stage for future tax policy debates.

Transcript

Kyle Hulehan: 0:00

Hello and welcome to the Deduction a Tax Foundation podcast. I'm your host, Kyle Houlahan, and we are back today with another episode, and we are joined by Garrett Watson, director of Policy Analysis here at the Tax Foundation, and Daniel Bunn, president of the Tax Foundation. Now, I would imagine you guys have heard something by now that there is a bill that was passed, a law passed, actually, and I think we're gonna talk about it once again. Today. So Daniel, I'm gonna start off with you. Uh, now that the one big, beautiful bill has passed, what are some of the good provisions in it why do they matter for taxpayers in the economy?

Daniel Bunn: 0:36

Thanks, Kyle. Uh, so this is a massive piece of legislation and there are certainly some good things in it. Um, but we'll talk through all the various trade-offs that lawmakers had to, to make. I think the biggest thing when I look at this legislation, um, the good kind of splits into two categories, and the b both follow our principle of stability that we care about here at tax. Foundation, and that's the permanence for the tax cuts for individuals and permanence on the pro investment, uh, provisions. If lawmakers hadn't passed this legislation, uh, individuals, households across the US would've seen a massive tax hike at the end of this year. In fact, our estimates, I. Uh, suggest that 62% of households would see a tax increase at the end of the year. So providing certainty to taxpayers and avoiding that tax cliff is really important. But the other piece that's permanent is provisions. Uh, that support business investment, like full expensing, uh, like, uh, immediate expensing for research and development. And then, uh, there's a couple of other pieces on interest treatment, but really this permanency is really the best part of the bill. Uh, and I think it was really good to have those things as part of this legislation.

Kyle Hulehan: 1:53

which part of the bills, and this is to you, Garrett, uh, are, are, what do you see? What's permanent? What's temporary? What's. Temporary and, and what does that mean for the future of tax policy?

Garrett Watson: 2:02

Thanks, Kyle. I think that's a, it's an excellent question because one major aspect, uh, of this massive legislation that policy makers are grappling with is what aspects of, uh, the tax changes they're making to make. Permanent over the 10 years of the budget window and beyond, uh, in which to make temporary. And there was a natural push and pull as it's made its way through Congress, uh, both for budgetary reasons to try to balance out the fiscal cost as well as to, uh, maximize the benefits that Daniel just, uh, outlined, uh, when it comes to stability and, uh, benefits both economic growth and to taxpayer certainty moving forward. And so the, the laws passed, ended up with a combination of. Uh, permanency as well as, uh, uh, new temporary provisions. There's permanency for the underlying, uh, TCJ individual provisions for the most part, uh, which is, uh, a, a good, uh, improvement for not just growth, but also for taxpayer certainty. Uh, there also was, uh, key here, permanency for the, uh, many of the, uh, business provisions, including expensing, uh, for bonus depreciation and r and d. Uh, but it was paired with temporary provisions, uh, for both businesses and individuals. For individuals, for example. There was a grand bargain struck on the salt, uh, deduction cap. So under the 2017 tax law, the salt deduction, which is a deduction for your state and local taxes paid against your federal, uh, taxable income. Uh, it was capped at$10,000 for all filers in 2017 and was a major, uh, sort of, uh, area of controversy and federal tax for, for many years now. There was a, a sense, an understanding that we needed to have a compromise or something needed to be landed on. In the law and what they landed with is a, basically a temporary expansion of that, uh, that deduction of$40,000 paired with an income limit. but then the deduction snaps back down to a flat$10,000, uh, starting in 2030 and beyond. And so that's, uh, one area where there's permanency, but the, the provision actually is cut in half and it will probably motivate policy makers to revisit salt yet again, uh, in 2029 or, or, or uh, 2030 when that ends up happening potentially. And we'll have another salt debate. Of course, the other major temporary provisions include the new, uh, deductions for a variety of economic activity that includes deductions and exemptions for, uh, tips for overtime. There's a new senior deduction worth$6,000 for someone age 65 and over. There's a auto loan deduction for your auto loan interest if you have a, a new vehicle that's, uh, assembled in the us. All of these new items that were. Uh, uh, that were recommended by the president and campaign Don during the 2024 campaign were included here, but they were made temporary. So they begin this tax year in 2025, and they go through the end of 2028. Uh, notice a theme here. The late 2020s will become potentially a new tax cliff. That may motivate, uh, more tax legislation if we don't get it before. Then another temporary provision was the new, uh, depre a hundred percent, uh, depreciation deduction for certain structures, uh, which is going to, uh, take effect, uh, this year and go through roughly 2031 for, uh. Uh, structures that are, uh, constructed in place in service by then. Uh, but it only qualify, is only qualifying for, uh, those structures that, uh, produce are associated with tangible production in the us. And so it's a subset of structures. It's an exciting, interesting, wonky provision, but it could help, uh, improve incentives for building structures in the us.

Kyle Hulehan: 5:19

And real quick here, uh, to you Daniel, I I, I wanted to ask, you know, we're talking about temporary things. We're talking about permanency. Could you just explain for our audience real quick? know, in the most simple way why value permanency over, uh, temporary policy.

Daniel Bunn: 5:35

Sure. So the big thing is, uh, people and businesses plan for the long term, and it's important for the tax code to also be situated so that those decisions can be made. Uh, if you are changing tax laws, every I. Year or every other year. Uh, then that creates a lot of confusion, a lot of complexity, and a lot of difficulty for individuals that might want to be able to plan over multiple years. And in fact, businesses plan investments over the course of many years, sometimes decades, uh, and providing stability in the tax code, uh, can really support, uh, better decision making or more effective decision making at all sorts of levels of the economy.

Kyle Hulehan: 6:15

Okay, so, so now with that understanding, how do we see the final version of this bill, you know, weigh with the trade-offs between economic growth and increased deficits?

Daniel Bunn: 6:27

Yeah, that's a great question. So lawmakers had a real, real challenge, uh, identifying savings that they could put in place, uh, that would allow some sort of offset for the tax provisions that they brought in. There was a whole debate about how you measure this. Relative to the baseline, but over the course of the legislation, they ended up with a policy that will increase deficits over the next 10 years by at least$3 trillion. And at the same time, they were able to adopt some pro-growth policies. But even after adopting policies that boost growth in our estimates by more than 1% over the course of the coming years, and, uh, over the long run. There's only about 20% of the revenues lost that comes back in the form of higher economic growth and supporting, uh, new revenues. So there's still a significant hit to the deficit in long-term debt. And that's something that I think lawmakers. Could have made better choices to have this be more fiscally sustainable. But the margins for, uh, the political coalition here were so slim. So, so few votes that they could lose, that they had to go searching for, uh, opportunities to increase the salt cap, like Garrett was talking about. Uh, they didn't have as much wiggle room on some of the spending cuts or even some of the treatment of some of the green energy credits. And that put them in a position where. They passed legislation that does address some spending concerns and significantly addresses these tax concerns, but adds a bunch of other pieces that are really expensive and don't necessarily fit a definition of fiscal responsibility.

Kyle Hulehan: 8:12

So, uh, Garrett, who do we think comes out ahead under this new law? You know, and, and who doesn't? What, what are the distributional effects? Tell us about the fairness of this bill.

Garrett Watson: 8:24

Right. So the distribution of the tax burden, of course, is one, one of the ways in which we can evaluate, you know, the impact of this legislation on, you know, on everyday folks. And so we leveraged our model and our data crunching to try to see how does, uh, folks after tax incomes change from this law relative to if the law was never passed. And so we can look at that in a few different ways. That includes ranking folks by their income, right? From uh, lower earning folks up to the top 1% and see how their a tax incomes. Are changed on a percentage basis, and a couple things stand out. One is, uh, one, the, the biggest component of this, uh, the tax component of this law was as we've been talking about permanency for the expiring 2017 individual provisions and important fact about those provisions is that they generally benefited taxpayers across the income spectrum. Uh, it was a large tax cut, right? In and of itself it's, uh, worth several trillion dollars over 10 years. Uh, and that's represented in our, our findings, right? We find after tax incomes. Uh, primarily boosted from this permanency are increased, uh, across the board in, uh, in 2026. So along, for example, the bottom 20% see a 2.6% increase in their tax income, and that, uh, is consistent across the board, averaging about a little over 5%. In that year. A bulk of that is from those, uh, permanency of those underlying tax cuts. Now, of course, one, uh, caveat, and it's been talked about a lot in the politics of this, is, uh, that is of course a continuation of the status quo. So we've effectively avoided a tax hike by extending those tax cuts. And so that increases relative to our world where we avoided, uh, uh, we avoided that tax hike. Um, so I think that's, that's an important caveat. But of course, there's all these additional tax cuts we've been talking about that are, that are labeled on top, that are also included. So that includes these new tax deductions. Uh, it includes the business provisions that, of course, are going to benefit both shareholders and workers in the, uh, short and long run that will increase after tax incomes. Uh, one, you know, limitation to some of the new deductions of course, is. Uh, well, I think there are two that are worth pointing out, um, in terms of, uh, who benefits. One, of course is unlike a lot of the permanent provisions from the 2017 tax law. These items are very targeted, right? When you're talking about a deduction for on tipped income or for overtime, or if you're a senior or you have an auto loan. Those are very specific economic facts about someone's life. That for some folks, they may see a big benefit, right? If you're a tipped worker working a lot of overtime, you may have a very significant change in your tax bill in the next couple of years. While those provisions are in effect, if you're someone who doesn't fall into any of these categories, uh, you may feel like it's just a continuation of the status quo. So it's very lumpy there in terms of the, uh, the facts of the matter, in terms of the change in incomes and, uh, the, potentially the perception of the law moving forward. So I think that's one thing to follow. The second is because a lot of these new. Tax cuts are designed as deductions. A lot of folks who are, you know, within the standard deduction already, uh, may not see an additional benefit, even if they qualify. So that's one reason why we see slightly smaller increases in after tax income at the bottom, uh, 20%. And of course, they're also gonna have to deal with some a. Uh, wonkier changes to the rules related to the earned income credit, the child credit, uh, the, um, affordable Care Act, premium tax credits that were, uh, that were changed in this law as well. Uh, that could, for some folks, they, they could see a, a, uh, a gross tax hike from. Um, and so the last thing I'll mention on the distribution is, of course, this does change a little bit as you get further out. So by 2034, for example, uh, the, the change in the in after tax incomes is still positive, but it's smaller in the next couple of years. And that's primarily driven by the fact that you have these temporary policies that are cutting taxes, but then, uh, are expiring. And then you have, of course, the, the tighter, uh, salt cap that comes back to$10,000 that will raise taxes further at the top. And so while it's still a tax cut at the end of the day, uh, by 2034, it's a bit smaller than in the next few years.

Kyle Hulehan: 12:16

Daniel, I, I'm wondering, you know, how is this bill being paid for? We're talking. About this big deficit increase and, and, you know, what are the, the revenue offsets that they found and, and what rollbacks do they maybe have with the inflation reduction Act and some of the credits there.

Daniel Bunn: 12:34

Sure. So on the Inflation Reduction Act side, there were significant trim backs to, uh, things like, uh, electric vehicle credits. And some of the special credits for green energy production, uh, and some savings that I think will be, will be meaningful assuming those savings are allowed, uh, to actually go into place as, and that a future Congress doesn't reverse some of the savings. Uh, additionally there were some changes to some of the spending programs that the federal government runs. Uh, through Medicaid or through snap and all of those added up to a pretty substantial offset to a lot of the other provisions in the bill and the additional spending items in the, in the bill. Uh, but as I mentioned earlier, on net, you're still looking at a long-term increase in, uh, debt and deficits. I, I. I think it's also interesting the, you know, discussion you were having with Garrett on, you know, who wins from this legislation. One of the, one of the areas I think that's, that's worth looking at is like in the, in the business community who, who wins. Um, and one of the things that we've looked at. And we'll have some data out on this, uh, in the coming days, is that this is, this is very much a huge win for manufacturers, uh, and especially because of the, uh, provisions for expensing, um, you know, companies that are heavy, you know, capital, heavy businesses, and that are going to be investing in response to this legislation. We'll certainly see, uh, lower tax bill and, uh, you know, we, we hope that some of that growth will, as we model it out. Uh, you know, come back to benefit, uh, the, the growth of the US tax base, uh, through, you know, higher, higher, uh, returns on investment. Um, rather than, you know, uh, saying we're gonna, you know, add, add new taxpayers to the tax base, but grow the tax base through economic growth.

Kyle Hulehan: 14:21

And so then Daniel, from an international, uh, standpoint, how does the bill position the US in terms of competitiveness and, and, and global tax trends?

Daniel Bunn: 14:31

Yeah, that, that's, that's a great question and this is a really tough one to tease out because different sectors are going to look at the tax legislation and have different opinions on it. Uh, there were several provisions. That could have made this legislation, um, very difficult for foreign companies to want to invest in the us. Uh, thankfully some of those provisions fell out, but then there were also provisions that were very favorable to, uh, different multinationals around the world, uh, that also fell out of the legislation. So on net, it's an adjustment to our cross-border tax rules. Uh, that is not. Too far off from the status quo on net. Uh, but it really depends on whether you are borrowing, uh, to fund new investment in the us whether you're headquartered in the us, whether you do your research and development in the us. Or whether you're a service provider or a heavy CapEx company. So it's, it's really kind of, uh, messy. But one of the big changes that was made is that a policy that was adopted in 2017, um, that's called Guilty and another policy. C uh, that was adopted in 2017 called, uh, FDII. Um, those were changed. The calculation for those were changed, uh, so that the minimum tax that we had on foreign income, the base is now broader for that the race is, uh, is adjusted, uh, a little bit higher. Um, but then some quirky things that were brought in in 2017 were fixed. Uh, and then similarly on the, uh, uh, FDII, which is an incentive to own your intellectual property here and, uh, export abroad from here. The base and the eligibility for that broadened significantly. Uh, and it's looks a little bit more like an export subsidy now, and it's. It's really not clear how this is all going to shake out the cross-border changes in the context where we have, as you all have talked about on this podcast, many times, a, a, a trade war going on. So it's, it's not a particularly pro uh, cross-border investment bill. It makes some changes around the edges and it's interest. It'll be interesting to see how these changes play out in the context of the ongoing trade war.

Kyle Hulehan: 16:53

We always get back to tariffs somehow on this podcast. There's always, we've always find a way we get there. Um, but Garrett, now that, um, now that the dust has settled here a bit, what are some of the more questionable gimmicks or, or missed policy opportunities baked into this bill?

Garrett Watson: 17:12

So there's several things here. One, of course, as we've been talking about is the continued existence, uh, of temporary policy primarily used as a gimmick to reduce the fiscal cost of score legislation. And so we saw that of course, with these new, uh, you know, deductions for tips and overtime and whatnot, uh, because there's a general sense that, um, that, that there's very high likelihood that Congress will come back in, in the future and extend or make permanent those changes. Uh, and so, um, while you could see it as a a, a test run, and I think it very well be what will be able for taxpayers in the IRS in the coming years for these new, uh, provisions, uh, that the intention is to continue them. And, and that's, uh, that was one I think missed opportunity to just be, um, uh, to be more transparent about what the real long-term fiscal cost is. Same thing is true, I think, of the salt deduction, right? Where we're seeing this.$40,000 increase, but then it's come back done to 10,000. I think, uh, folks who are in favor of that design would say, Hey, it flips the, the, uh, prior situation on its head in that the salt, uh, deduction cap was scheduled to expire. And so if we did nothing, there would be an unlimited salt deduction. Now, if nothing is done,$10,000 cap remains, and maybe that makes that cap more, more durable for folks who wanna see a tighter limit on salt. But it does still introduce more uncertainty about where salt is gonna be in the coming years for taxpayers, and it brings salt back into the debate. Um, uh, in, in the, in the late 2020s, which could be, uh, problematic if they tried to, you know, extend the$40,000 design instead and that would cost more revenue. Um, you know, relatedly, of course we have, there's been discussion about, uh, how contrasting the way in which, for example, the 2017 tax law was approached from a policy perspective where we were trying to broaden the tax base and lower the rates and really rationalize and reform and simplify the tax code in some ways, of course, permanency for the 2017 tax law. To be fair, that was continued, right? We did see an expansion of this deduction. We did see, uh, you know, some other simplification that was preserved there, but there were some steps, you know, uh, that were taken back on this, right? When we look at targeted deductions for certain groups of folks based on certain economic activity, not only is that complicated, that is, uh, it's actually, uh, reversing tax reform, right? You were narrowing the base and that requires higher rates for someone else to raise the same amount of revenue. Uh, and that's, uh, inefficient and the opposite of where we wanna be going. Uh, that also relates closely to the deficit impact as Daniel outlined, right? We're seeing a, even including the dynamic impact from higher economic growth and some of the revenue recycling from that, uh, that larger economy, we're still seeing a$3 trillion deficit increase over 10 years at a time where interest rates and financial stability are. In question. Uh, of course there were uh, tax options left on the table that we've been outlining and other policy experts have mentioned to broaden the tax space to really continue the progress we made in the 2017 tax law. Uh, and so that's, uh, another missed opportunity. We'll have to see if that, um, comes back up in future, um, either future reconciliation bills or in future congresses to continue that work. There were, of course, other odds and ends that you'd always wanna see improved. We would love to see the structures. Incentive through, uh, immediate expensing, uh, to be made more durable or some form of, uh, neutral cost recovery, which we talked about on this show before, uh, ideally, uh, made, made permanent. Uh, there's also, of course, we haven't talked about it yet, but a lot of folks have questions and interest in these, uh, these Trump accounts, which are new. tax advantaged account for children. Uh, the reason why there's a lot of questions is they are quite complicated, uh, in terms of how they, they work. There are rules, uh, and of course they need to be stood up by treasury still. Um,'cause there's gonna be a thousand dollar contribution for every child that's born between 25 and, uh, I believe it's 2028. Uh, we, of course, recommend Universal Savings Accounts to streamline and simplify the tax treatment of savings. Uh, you know, this, these Trump accounts, uh, provide partial relief in some ways, but in a lot of ways they make the, the, the compound, the existing complexity and con confusion surrounding tax, uh, incentivized accounts for saving. That's just another example of some odd ends. Uh, on the bright side, you know, silver lining is, uh, this is not the end of, uh, tax reform or tax policy. I think that's gonna be a big. message for us moving forward. Um, and maybe we're biased'cause that keeps us, uh, uh, having work to do. Uh, but there will be opportunities in the future to, uh, to, to build on and improve this work. Uh, much like uh, uh, has been done since, uh, the 2017 law passed.

Kyle Hulehan: 21:32

You know, Garrett, there was something I, I actually wanted you to flesh out from earlier a little bit that I, that I, um. heard you say, which was, you mentioned that, that some people wouldn't be able to use some of these deductions because they, they fall into the standard deduction and, and so it might not help the people that these deductions were intended to help. Could, could you explain that maybe in a little bit more simple of a way for me to understand that?

Garrett Watson: 21:57

Right. So at the, for folks who are, uh, you know, uh, working class folks say who, uh, are working a restaurant job and let, let's say it's a part-time job. They might be, you know, fresh outta college or in college and they only earn, say,$15,000 a year. That's already, uh, at basically at the standard deduction amount, which for single filer this year is$15,000. So that means is they're taking that introduction. They effectively aren't paying any. Any tax. And so there's no additional, uh, taxable income to use this deduction for. So even though you could say their tips are now deductible, it's already basically covered under the standard deduction. So for folks in that income range, a lot of them are, you know, folks who are maybe working part-time or getting started in the labor market, um, or just lower income in general. That just limits the benefit of certain deductions or non-refundable credits. Uh, just mechanically, right? And in some ways that is a testament to the fact that we do have a progressive tax system and we are shielding low income folks from, uh, from tax burdens. But it also makes the, you know, the, uh, the political project of tax cuts, if you will. Um, harder for that reason, uh, where you know, you need to have refundable credits or other means by which you, uh, you get to, uh, you know, increase their upper tax incomes.

Daniel Bunn: 23:05

Yeah, I, I was on, uh, CSPAN yesterday and someone asked me if they, you know, don't pay tax this year, should they expect to get a tax cut next year. It wasn't quite phrased exactly like that, but the answer is like, if you're not paying taxes because your income is already low enough and you are eligible for, uh, the standard deduction or, uh, using various other credits that wipe up, wipe out your tax liability, then it's likely that your tax liability will still be zero after this bill.

Kyle Hulehan: 23:33

Okay, then that makes sense. I, I was able to follow that. Thank you. Um, so I think we might know the answer to this question. But Garrett, does this bill simplify the tax code or does it make it more complex and and what sort of challenges does this put on the IRS?

Garrett Watson: 23:48

Right, so the when, whenever you have major policy changes like this, there's always a thing going to be some complexity and confusion. In the short run, of course, E, even if you had a law that made things a lot simpler, the transition itself is going to be a. Uh, it can be a challenge, and I think that is, that does, uh, put added pressure and responsibility on, uh, tax authorities on both the IRS and Treasury as the agency responsible for proclamation regulation to. Make things as straightforward as possible for taxpayers. And of course, uh, ideally the underlying law would simplify and be very clear about what the, what that may look like in terms of actual administration and real world, uh, you know, use by taxpayers and practitioners. Uh, and I, I, you know, thinking about this a little more of the last couple weeks, I think it's at best a mixed bag, right? Where you can, on the one hand, look at, uh, as we've talked about in, in other, um, in other respects, right, the underlying permanency of the 2017 tax law. That did, uh, you know, reduce the share of itemizes, for example, from about 33% down to about 9% this year. That will be continued forward. That's a win with respect to continuing the status quo, uh, which is great. There's of course caveats on that. There's still gonna be folks who need to calculate their itemized deduction to compare it against the standard deduction, right? It doesn't bring it down to zero, but it does help quite a bit. Um, and that will be continued. That legacy has been preserved. That's a big win. But a lot of that, of course, is counterbalanced by the fact that you do have a lot of these new. Uh, provisions that, uh, folks will need to grapple with that are particularly, um, uh, either complicated or targeted, uh, are new and, uh, will require guardrails to, uh, to stop avoidance, right? There's a lot of discussion about, it's, it's basically a meme at this point, but, you know, converting folks full-time income into tips or trying to gain things to, to earn more tax exempt, uh, overtime income. Some of those more aggressive or, you know, MeMed examples are probably not likely, but there are lots of edge cases. That we may not be able to think about right now, that people are very creative and motivated, uh, to minimize their tax liability that the IRS and Treasury will have to combat. And that makes things complicated for everyone. Uh, and so that's, that's one I think concern you layer on top of that. Of course, these, the fact that they're, the, the dates, the effective dates of when these things start and stop, uh, are all different. I've gotten a lot of questions from media and taxpayers on, does this item start in 25 or 26? Because it's inconsistent across the law. Simple things like that, I think add up when you really aggregate them all altogether, um, uh, when it comes to a, a piece of legislation of this size. So I think there's still a lot of work to be done. Uh, and part of that has to do with just sort of zooming out a little bit, right? That, uh, this was a missed opportunity and that it did not. The primary goal was not, you know, full rationalization or transformation of the tax system. Part of that has to do with, you know, the political constraints. Part of that has to do with the priority was preserving the, the progress we just talked about from the 2017 tax law. But that does limit, uh, realistically the ability of lawmakers to significantly improve things. On the simplicity front, um, in the, in the sort of, when you think about next steps, I think it is, uh, that all attention is gonna be paid to the IRS and Treasury on, uh, the, uh, on, on their ability to stand up these. Regs and guidance very quickly. It's very likely we will not get finalized regs by the next tax season. So they will need to, to offer, uh, basically FAQs and guidance in lieu of that. That was done, uh, during the 2018 tax season when the TCJ was still being rolled out. Um, one piece of good news, of course, is because there's permanence of a lot of underlying law. Uh, that they, that will just continue. It's most of the new stuff that will have to be dealt with, but they have a lot on their plate between now and then. Um, and final thing I'll say, of course, is there's now some uncertainty about specific items. In particular, the rules related to, for example, IRA tax credit, uh, uh, uh, qualification for that are currently being constructed. Apparently there were some side deals made between the White House and. Uh, members of Congress who are voting on the legislation, uh, and there's now all of a sudden uncertainty about how that will be interpreted in regulation. So there's gonna be items like that that are going to continue to, to contribute to complexity and, uh, tax debate in the coming months.

Kyle Hulehan: 27:48

Yeah. So I, I think it's safe to say things got a little more complicated. Um, but to you, Daniel, uh, with this bill now being the law, w what's likely the next round of fixes, clarifications, or political fights? Fights that we can expect?

Daniel Bunn: 28:03

Yeah, that's a, that's a good question. It's hard, it's hard to forecast some things, but as Garrett said. There's a lot of cliffs that this law sets up. Uh, so going into 2028 and 2029, I would expect there to be political lines being drawn around some of the provisions, whether it's the, the salt cap or these new provisions for no tax on tips, no tax on, uh, over time, et cetera. And trying to figure out what, uh, a rational extension or expiration, uh, of some of these things looks like. And also what might be utilized to offset the cost of extending some of these policies. Uh, another thing that I think is worthwhile thinking about, going back to where you opened the conversation, Kyle is thinking about the good things in this. Uh, legislation and thinking about how to keep those things as long as possible, even though there will be future debates about them. Uh, so one of the things we haven't talked about yet is there's a, there's a new limitation on itemized deductions that I think is one of the best revenue raisers and best designed revenue raisers. Uh, in the bill. We talk a lot about. Uh, at Tax Foundation about the complexity of all the various deductions and carve outs and, and provisions that really narrow the income tax base. And this provision is something that limits the value of itemized deductions at 35% for people in the top income tax bracket. And it would be great to see legislation, uh, future legislation that doubles down on that. And we get. Uh, essentially a broader and better tax base over the course of time, while also protecting some of the pro-growth elements like full expensing, uh, expensing for research and development and, uh, some of the other provisions, you know, hoping to get some extra length of time out of the structures provision. Um, another element of the coming debates is that we're getting closer and closer to, uh, real challenges with the broad entitlement programs and the trust funds, uh, that support those programs. Uh, in the early 2030s, there could be automatic benefit cuts if Congress doesn't change the provisions that support things like social security and Medicare. And we're already thinking at Tax Foundation about what options lawmakers might be, uh, might, might, should consider as we get closer to that deadline. Uh, both on the benefits side and on the revenue side. I think there's a lot of work that needs to be done there. I. Uh, and honestly, given the amount of regular turnover we see in Congress, it's not clear who will have leadership, uh, either politically, uh, with, for the different parties or whether current members will still be around, uh, uh, in Congress. Um, pushing forward on different fiscal policy efforts or if it will be a whole new, uh, generation of lawmakers. By the time we get to the early 2030s, we've seen a lot of turnover, uh, in the last several years, and that could con continue.

Kyle Hulehan: 31:05

And before we start off, uh, to you, Garrett, I, I just wanted you to give you a chance, is there any work you're doing right now that you wanna plug for the people to know about?

Garrett Watson: 31:12

So

Daniel Bunn: 31:12

I.

Garrett Watson: 31:13

on a few different things, following up from the passage of. This law, uh, two very exciting products that we're halfway through. Um, finishing up to on the website is an update to our interactive, uh, tax map and calculator where you're able to look at the county by county impact of the law when it comes to changes in after tax incomes, as well as inability to look at, uh, some stylized taxpayer examples of how the law will change tax liability. Uh, if you're, you're earning some additional, uh, uh, tips or you have a child who's gonna benefit from the, you know, expanding child tax credit, et cetera, you're able to calculate that, uh, on the fly. And that's a, uh, expansion and update from our popular products, uh, for TCJ expiration that we released last year. We're also doing some, uh, some additional, uh, research of course, uh, based on a lot of feedback we've gotten from folks. Um, across our different audiences. One is, as, as Daniel mentioned, uh, industry by industry analysis of the, uh, business provisions, which is really, uh, an interesting, um. A story that's been not been talked about as much as part of this, this debate. Uh, we're also working on looking at, in detail the combination, the impact of the combination of this law with, uh, with tariffs to come back to tariffs. Uh,'cause that's gonna be an important discussion, particularly this month as the White House continues to try to finalize trade agreements or go their own way on. tariffs in other countries, which of course, will, uh, threatens to significantly degrade or mute the, uh, impact, positive impact on people's, uh, wallets, uh, over, over the coming years. So we'll have an updated analysis on that in detail, which will be helpful. We're also working on, uh, a, a longer form piece aimed at, uh, policy audiences looking at, uh, precisely the, what we were just talking about before on the net simplification or complexity that this. Uh, law offers, uh, to taxpayers and try to provide some constructive, uh, recommendations moving forward that were left on the cutting room floor that could be considered in the, in the debate as we, uh, as we move forward.

Kyle Hulehan: 33:06

And Daniel, is there anything you wanna plug before we sign off real quick?

Daniel Bunn: 33:09

Yeah, I think two things. Uh, one, uh, we're continuing to look at the international side of this legislation and, uh, the role that, uh, those rules play relative to the global minimum tax, which we've talked about on this program before. Uh, there's a lot of complexity and some uncertainty. There, but, uh, there has been some progress on getting things a little bit more stabilized, so certainly paying attention to that. And then more broadly, there's, there's a lot of work to be done to educate, uh, both policy makers and the public on like what the choices were. I. That led to this legislation and whether those choices were the right ones or if better choices could have been made. Uh, and that's going to be kind of a long-term effort, but certainly taking some time over the course of the next couple of weeks to think through what opportunities we have to kind of, uh, show where, uh, the policy could have been improved, um, and what choices that were made that were actually good and, and net beneficial.

Kyle Hulehan: 34:08

And thank you both for being on the show today and breaking all of this complicated stuff down for us. Uh, and I want to let the people know if you have any burning questions on taxes, you can send them our way. You can drop a comment on YouTube. You can email us at podcast@taxfoundation.org, slide into our dms at Deduction Pod on Twitter. you all for listening.