On the "One Big Beautiful Bill" Act - and What Comes Next
With the Sword of Damocles dangling overhead, Republicans prevented a massive tax hike and advanced important reforms - but left much more work to be done.
Last week, Congressional Republicans passed and President Trump signed into law the “One Big Beautiful Bill” Act (OBBBA), a sweeping budget reconciliation bill that enacted changes to tax law, Medicaid, energy policy, and more.
I was proud that FREOPP scholars engaged in a timely and thoughtful manner throughout the debate - leading original research, dispelling misconceptions, offering innovative solutions, and more.
Linked here and listed, in part, below are some of our team’s work on this topic throughout the past several weeks:
Michael Tanner, FREOPP.org, TCJA: A boost for poorer Americans, May 5, 2025
Avik Roy, FREOPP.org, New ways to reduce Medicaid spending while protecting the vulnerable, May 8, 2025
Dan Lips & Michael Toth, The Hill, The one-two punch working parents need for educational choice, May 22, 2025
John Hartley (with White House National Economic Council Director Kevin Hassett and Stanford University’s Josh Rauh), National Bureau of Economic Research, Firm Investment and the User Cost of Capital: New U.S. Corporate Tax Reform Evidence, June 16, 2025
Michael Toth, RealClearPolitics, GOP Tax Bill Will Uplift the Poor–Again, June 25, 2025 (Picked up by Yahoo! News)
Michael Toth & Grant Dever, RealClearEnergy, The Tax Bill Powers Up Affordable, Reliable Energy for Working Families, July 3, 2025
FREOPP also hosted a timely briefing on Capitol Hill earlier this spring. The morning before the House Energy and Committee marked up the legislation’s Medicaid reforms, Avik Roy - joined by panelists from the Cato Institute and the Economic Policy Innovation Center - briefed nearly 20 key staff on the same topic, discussing the proposed changes, their impact on different populations, and Medicaid’s overall fiscal situation.
As I moderated that panel, it was eye-opening the extent to which these bright and intellectually curious staff were hearing for the first time the truly dire state of Medicaid’s finances and health outcomes for the poor and some of the myths vs. facts of the proposed reforms.
It’s clear there is significant need - and demand for - more of this type of engagement from FREOPP on Capitol Hill.
Overall, the legislation is a decidedly mixed bag of pros and cons, and reasonable people can disagree on which bucket matters more. Absent action, the individual tax cuts and other reforms from the 2017 Tax Cuts and Jobs Act would have expired, resulting in a massive tax increase on a significant majority of American households of all income levels. Critically, that tax hike was prevented. And contrary to some claims, as Michael Tanner and Mike Toth have written, the 2017 rate cuts and other changes did in fact benefit Americans of all income levels.
Moreover, the OBBBA contained a policy known as 100% bonus appreciation - the subject of John Hartley’s NBER paper - a tremendously pro-growth provision made permanent that will result in more domestic business investment, leading to more jobs and higher wages for American workers.
Outside of taxes, most notably, OBBBA contains work requirements and other safeguards intended to ensure that Medicaid is reserved for truly vulnerable American citizens. Opponents have raised reasonable questions about these provisions, but as a matter of principle, our safety net should be preserved for the truly vulnerable, and public policy should reflect that able-bodied, working-age adults should be afforded the dignity of earned success. More generally, entitlement programs (like Medicaid, along with Medicare and Social Security) are the primary drivers of the national debt, but have long been an untouchable third rail. It is noteworthy that this legislation opened the door for further entitlement reform, which is critical not just to address the debt but ultimately to ensure that our safety net is sustainable in the long run.
Moreover, as Grant Dever and Mike Toth wrote, the energy policy reforms will improve grid reliability by scaling down wind and solar subsidies, while reducing barriers for energy exploration. Low-income Americans spend a greater share of their income on energy costs, and affordable, abundant, reliable energy is critical to economic prosperity and wellbeing - so these changes help to advance FREOPP’s mission.
Finally, the legislation enacted important education reforms such as a school choice expansion and improved higher education tuition accountability.
However, the bill’s negatives should not be ignored. It contains several gimmicks and distortions of the tax code that choose winners and losers and do nothing to generate economic growth that will uplift the poor. The enormous deficit impact is also cause for concern - debt and deficits are a drag on growth, will lead to future tax increases, and ultimately put programs at risk that needy Americans rely on - making additional entitlement reforms even more important.
Ultimately, given the makeup of Congress, it stands to reason that this exact bill was the only one that could have passed, and we should not lose sight of that. But we must also not lose sight of the fact that this legislation creates greater need and opportunity for precisely the work that FREOPP exists to do - such as state and federal welfare reforms, health care and entitlement reform, and education innovation.
We’ll continue to rise to that challenge with timely and original research and analysis and direct engagement with policymakers - as always, with a commitment to advancing free-market-oriented public policy that uplifts the poor.
In freedom,
Akash Chougule, President