A bill, which is being discussed and debated in the US these days is President Donald Trump’s “One Big Beautiful Bill” (also known as OBBBA). Though the bill has finally been passed by the Parliament and approved by the President, in the process, it has definitely broken a friendship that was in the news recently, where Elon Musk was seen as Santa, to President Trump, as he played a significant role in getting him elected to this post. Elon Musk is so upset with this law that he has even formed a new political party. While President Trump claims that his bill will bring more prosperity to the US than ever before, and help make America great again, critics including Elon Musk believe that this bill can wreak havoc on the US economy.
Before passing any judgement on who is right and who is wrong, let’s try to understand what this bill means?
One thing for sure is clear that bill will increase the federal deficit in the coming decade. The US debt is projected to increase by $3.3-$3.9 trillion in the next one decade, from 2025. Currently, (as of 2025) US national debt is over $34 trillion, which is more than 120 percent of its GDP, and is very high even from the perspective of a developed country.
It is clear that the federal debt is already very high, and the interest outgo on increased debt could deteriorate the economic scenario for the US. Interest payments on the existing debt are already the largest federal expenditure, competing with defense and health expenditures, and this scenario could get even worsen in the coming years. Although, this new law will lead to a huge jump in the federal debt, but with the debt increasing from time to time, Americans have realized its inevitability. Perhaps, this is the reason that although those aware of its impact are worried, the general public may not be. This is why Trump has been able to garner support for the bill in the Parliament and among the general public as well.
But the markets are not so kind to Donald Trump, as they are signaling the potential risks from the rising debts. The yield on US government bonds is rising as investors are demanding higher returns for holding the debt. Some experts have also warned of a fiscal crisis if the yield on government debt rises. If the US is unable to control its debt or the world loses confidence in the dollar, the crisis could worsen. Rating agencies such as Fitch have already downgraded US credit rating, citing long-term fiscal challenges.
Another provision that has been controversial, is the provision to phase out the clean energy tax credit. The clean energy tax credit was included under past President Biden’s Inflation Reduction Act (IRA) 2022.
The Inflation Reduction Act introduced a number of tax incentives to promote clean energy, including a variety of tax credits for solar, wind and other renewable energy projects, electric vehicle (EV) taxes, home energy efficiency upgrades, etc.
These credits were designed to promote investment in clean technology, reduce greenhouse gas emissions and speed the transition to a low-carbon economy. The new law will roll back most of these credits over a period of time, usually 2 to 5 years.
The argument for rolling back these tax credits is that they promote unnecessary government intervention and market distortion. These incentives cost hundreds of billions of dollars and add to the national debt. Donald Trump says fossil fuel and traditional industries should be given a level playing field. He says energy policy should focus on affordability and reliability, not just decarbonization.
Opponents say rolling back these credits will slow clean energy deployment and undermine climate action. The move could also discourage private investment in renewable infrastructure and domestic manufacturing, threatening jobs in the growing clean tech sector.
By phasing out the Clean Energy Tax Credit from the Inflation Reduction Act, this law marks a significant shift in US energy and climate policy. While governments all over the world, including India, are making major efforts to promote green energy expansion, this move of the Trump administration is being considered regressive.
Under the new law, a 1 per cent tax will be levied on international remittances in the form of money sent from individuals in the United States to individuals outside the country. It is worth noting that the House version initially proposed a 3.5 per cent tax, but the Senate lowered it.
Other major provisions of the bill
There are hundreds of provisions in the OBBBA. The Tax Cuts and Jobs Act of 2017 (TCJA) was signed into law by President Donald Trump, under which for most income groups, personal income tax rates were reduced and standard deductions were increased, and tax credits for children were doubled. These reliefs were to expire at the end of 2025. The “One Big Beautiful Bill” removes that expiration date, making lower individual tax rates permanent. This means that unless Congress changes the law again, Americans in most income brackets will continue to benefit from lower marginal tax rates, higher standard deductions, higher tax credits for children, and more.
The One Big Beautiful Bill (OBBBA) increases the Child Tax Credit (CTC) to $2,500 per child (from $2,000 earlier) to provide more financial support to families with children. It’s important to note that a large portion of the credit is refundable, meaning families can receive the money even if they owe little or no income tax.
The One Big Beautiful Bill will reduce the burden of the Alternative Minimum Tax (AMT) on middle- and upper-middle-income taxpayers. The Alternative Minimum Tax is a parallel tax system designed to ensure that higher-income earners, who benefit from many deductions and credits still pay a minimum level of tax.
Workers will also find relief in this law. The law specifically introduces new tax deductions for tips and overtime pay, aimed at benefiting hourly employees, especially those working in hospitality, retail, service, etc. Tip-earning workers (such as restaurant servers, bartenders, hotel workers, etc.) can now deduct a portion of their reported tip income from their taxable income. The bill also allows a deduction for income earned from working overtime, typically hours worked in excess of 40 hours per week. These measures will increase take-home pay for workers who rely heavily on tips and overtime, encourage hard work, especially for those who put in extra hours, and also help address income volatility in sectors with inconsistent pay.
Although the Trump administration has succeeded in making this law that reduces taxes and increases debt, but due to this political turmoil has increased. America’s increasing debt is now a reality, how will it deal with it? What will be Trump’s plan to deal with the challenges facing the dollar? How will Trump deal with the crisis of inflation for the common man and what will be the fate of America’s regressive policy in view of climate change in the world? All these questions are currently not only before US, but the entire world.
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