House “One Big Beautiful Bill” Riddled with Temporary Tax Policy

The Ways and Means “One Big Beautiful Bill” tax package would make permanent many of the expiring and changing provisions of the 2017 TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Cuts and Jobs Act (TCJA), providing certainty for taxpayers on some major provisions of the individual and international tax systems. But on the other hand, the bill introduces several new temporary provisions and phaseouts that a future Congress will soon have to address. Here’s a timeline of the new temporary tax policies under the House bill.

Individual Provisions

The bill provides several additional tax cuts for individuals available for tax years 2025 through 2028, expiring after President Trump’s term ends. It would increase the maximum child tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income rather than the taxpayer’s tax bill directly. by $500 and the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes. by $1,000 for single filers, $1,500 for head of household filers, and $2,000 for joint filers. It would create several deductions, including for tip income, the “half” portion of time-and-a-half overtime pay, senior citizens, auto loan interest, and charitable giving for non-itemizers as well as a tax credit for contributions to scholarship granting organizations (available from 2026 to 2029).

The new deductions make tax policy worse. They are targeted at narrow groups of taxpayers or types of economic activity and will place new administrative burdens on businesses and the Internal Revenue Service to determine rules, report required information, and enforce compliance. While temporary tax policy is usually ill-advised, if it means these provisions expire as scheduled and don’t receive a permanent place in the tax code, it would be for the better.

The bill includes a pilot program that would make a $1,000 deposit into a new tax-preferred savings vehicle (called “MAGA accounts”) for newborns born in tax years 2025 through 2028. Unfortunately, the accounts would be layered on the already complex web of existing tax-preferred savings vehicles and come with a new set of rules and restrictions.

It would also extend the “Opportunity Zones” program, permitting designation of new qualifying zones between January 1, 2027, through December 31, 2033.

Business Provisions

Three provisions provide full, immediate expensing for different types of business investment: machinery and equipment, domestic research and development, and structures in manufacturing, agriculture, and extraction industries. If the bill had made the cost recoveryCost recovery is the ability of businesses to recover (deduct) the costs of their investments. It plays an important role in defining a business’ tax base and can impact investment decisions. When businesses cannot fully deduct capital expenditures, they spend less on capital, which reduces worker’s productivity and wages. provisions permanent, they would have been the most pro-growth part of the entire package.

But because the expensing provisions are temporary, they should not be expected to permanently increase investment or growth in the economy. Businesses make investment decisions over a long horizon, and a temporary improvement in the tax treatment of initial investment costs, combined with an uncertain future, severely undercuts the intended incentive.

The other business provision is a loosening of the limitation on business net interest deductions, reverting to a 30 percent limit based on a broader measure of business income that was in place prior to 2022. Previous Tax Foundation modeling suggests one revenue-neutral option would be to switch back to the broader measure of income used by peer countries and lower the percentage limit.

InflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. Reduction Act Credits

My colleague discusses the details of the Inflation Reduction Act (IRA) credit changes of the bill here. From the standpoint of taxpayer certainty, scheduling phaseouts of the tax credits for years later leaves open the possibility that a future Congress may further extend the phaseout.

After all, that’s how many of these green energy-related tax credits still exist today: their original phaseouts were extended many times over, for one or two years at a time, until the IRA provided longer extensions for most. The approach here risks turning many of the energy tax credits back into “extenders”—zombie-like policies that tend to live past their initially scheduled expiration date.

While lawmakers should be commended for pursuing permanence for some provisions, the overall effect of the bill on growth, certainty, and stability is severely limited by all the new temporary policies and scheduled phaseouts. As lawmakers continue to debate the “One Big Beautiful Bill,” they should abandon temporary and complex policy in favor of simplicity and stability.

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