The following is an excerpt from the July 2025 ITR Trends Report™, click here to gain access to the full article.
It is big. Really BIG. The recently signed One Big Beautiful Bill Act (OBBBA) goes beyond tax policy and changes incentives for agriculture, defense, education, energy, health care, immigration, and transportation. Here is our initial, apolitical, big-picture take on the impact this bill will have on the consumer, capex, and the macroeconomy. We will also consider its longer-run consequences.
The OBBBA extended some tax provisions from the Tax Cuts and Jobs Act of 2017 that were set to expire. These represent a continuation of the current status quo, and their continuation is therefore not likely to alter the macroeconomic course. What matters for economic growth are the new provisions.
The White House heralds new benefits for the middle class by highlighting no tax on tips, overtime, and social security; larger child tax credits; and tax deductions for interest on loans for vehicles that are made in America. “Promises kept” come with many technicalities, and the reality is more limited. These benefits are temporary, slated to end in 2028. They are capped as well ($25,000 for tips, $12,500 for overtime, a $6,000 deduction for seniors, and $10,000 for auto loan interest). These provisions are phased down based on income. The fine print suggests that the positive benefit is not quite as grand as the headline claims. Some partially offsetting downsides include new rules around Medicaid, education loans, and an earlier phaseout of clean energy subsidies. Lower- to middle-income demographics are likely to use net gains from OBBBA tax cuts to increase their present consumption, as a little more spending can have a big impact on their quality of life.
In recent years, we have been encouraging our readers to analyze the demographics of their specific end markets. This information will come in handy when estimating a potential impact from the OBBBA on your niche.
The OBBBA includes provisions that could encourage more investment. A few items especially stood out to us:
This represents both the expected continuation of existing rules and some new improvements. These provisions could help free up cash flow and seed investment in the near term. If your niche serves small business owners, the qualified business income (QBI) deduction was made permanent; this is not new but is a benefit. This is not an all-inclusive list of the tax changes, and we highly recommend consulting a tax professional to reassess your tax strategy.
Policy changes can alter incentives and typically benefit some groups while hurting others. A list of relative winners from the OBBBA can be found in the full edition of this page.
The bill also comes with some notable losers, as it includes provisions to retract unobligated funds from acts passed by the previous administration. This is a good reminder that while governments continue to spend, stimulus to particular industries is often ephemeral and the sectors that receive stimulus can change from administration to administration. Here are where we could see some losses:
In the medium to longer term, healthcare is still an area of opportunity, given the aging demographic in the US and in many other countries. However, be prepared for some swings as this industry grapples with affordability and changing government funding.
Looking to the longer term, the OBBBA does not steer us away from a depression in the 2030s. The consensus is that the OBBBA will increase federal deficits.
We are urging our clients to prepare for a tough economic climate for at least the first half of the 2030s. There is still time to position your business to weather that storm. Look for ways to diversify, consider adding exposure to less cyclical or countercyclical markets, and, most importantly, try to enter the 2030s with a minimal debt burden and some extra cash.
Our research on the OBBBA is ongoing, and trade negotiations are still in the works but approaching deadlines.
There is a lot of change taking shape and you do not have to face it alone. To talk through how the OBBBA impacts your markets or your business, reach out to us here, we are happy to help!