As the “One Big Beautiful Bill” makes its way to the Senate, investors are keeping a close eye on the details. The proposal carries major implications for tax policy, estate planning, market sectors, and federal debt. Here’s what’s in play, and what it might mean for your finances.

Key Tax Changes: Opportunities and Cautions

Tax policy is the most headline-grabbing part of the GOP proposal, and for good reason. With sweeping changes, these provisions have far-reaching implications for individual investors, business owners, and families alike. Some changes are designed to be permanent, while others are temporary. Understanding which tax breaks apply to you (and for how long) is crucial to making timely, strategic financial decisions.

Individual Tax Cuts Made Permanent

The cornerstone of the proposal is an extension of the 2017 Tax Cuts and Jobs Act (TCJA). This would lock in lower individual income tax rates, expand the standard deduction, and secure the increased alternative minimum tax (AMT) exemptions.[i] However, many provisions are still set to phase out in 2028–2029. This leaves the door open for future legislative uncertainty. So while long-term tax planning can continue under the current brackets, it’s wise to plan for a potential “tax cliff” around 2029.

SALT Deduction Cap Raised

The bill significantly expands the state and local tax (SALT) deduction from $10,000 to $40,000 for filers earning under $500,000.[ii] This would benefit higher-income taxpayers in high-tax states. For example, a larger SALT deduction could improve after-tax returns for investors in states like California, New Jersey, and New York. However, the Senate may scale this back due to cost concerns.

Estate Tax Exemption Increase

The federal estate tax exemption would rise to $15 million per person, indexed for inflation.[iii] This would shield more wealth from estate taxes, simplifying legacy planning for high-net-worth families. This may offer an expanded window to update estate plans and consider new gifting strategies.

Child Tax Credit and MAGA Accounts

The child tax credit increases from $2,000 to $2,500 until 2028, and new MAGA (Money Accounts for Growth and Advancement) accounts will receive $1,000 for each child born between 2025 and 2029.[iv] Parents can contribute up to $5,000 per year, and growth is tax-deferred. For young families, MAGA accounts could serve as flexible, tax-advantaged tools for future expenses like education or housing.

Temporary Tax Breaks for Tips and Overtime

For 2026 through 2028, tips and overtime income will be tax-exempt, along with interest on American-made auto loans.[v] These provisions are likely to have modest macroeconomic impact but offer targeted relief to working-class taxpayers. Additionally, their temporary nature limits their strategic value.

QBI Deduction for Small Businesses Rises to 23%

Pass-through businesses (including many LLCs, partnerships, and sole proprietors) would see their Qualified Business Income deduction increase from 20% to 23%.[vi] This is considered a win for small business owners and investors in private entities, enhancing after-tax profitability.

Spending Cuts and Safety Net Adjustments

While tax relief is a focal point, the bill also proposes dramatic cuts to federal entitlement programs to offset its cost. Medicaid, food assistance (SNAP), and federal student loan programs are among the biggest targets for reform, with new work requirements and reduced funding leading the way. Investors should pay attention to how these cuts may influence demand, labor force participation, and long-term growth.

Medicaid and SNAP Cuts
The bill slashes $880 billion from Medicaid and introduces stricter work requirements beginning in 2026, impacting millions of beneficiaries.[vii] SNAP (food assistance) costs are also shifted more heavily to states. While this could reduce federal spending, ripple effects could be felt in healthcare and consumer sectors, especially among lower-income populations.

Student Loan System Overhaul
A proposed consolidation of repayment plans aims to save $330 billion over the next decade by reducing borrower benefits.[viii] This could slow consumer discretionary spending among younger households, potentially impacting retail and service industries.

Defense, Border Security, and Infrastructure Spending
The proposal doesn’t just trim spending: it also injects major new funding into areas prioritized by Republican leadership, particularly defense and border security. While politically charged, this increased funding could generate tailwinds for defense contractors, infrastructure firms, and industries connected to national security and public safety. For investors, these are sectors worth watching closely.

Increased Defense Outlays
The House bill allocates nearly $150 billion in new defense spending, including[ix]:

• $25 billion for a new “Golden Dome” missile defense shield
  • $21 billion to replenish ammunition supplies.
  • An additional $5 billion is earmarked for expanded border security and immigration enforcement.

Defense contractors and related sectors could see growth. Infrastructure stocks tied to border enforcement may also benefit.

Debt and Deficit Dynamics

Despite efforts to reduce spending, the legislation’s overall cost still increases the federal deficit and raises the national debt ceiling. With trillions in tax cuts and new appropriations on the table, the Congressional Budget Office projects the bill will significantly widen the fiscal gap in the coming decade.[x] This could have serious implications for interest rates, inflation, and long-term economic stability. Investors should understand how expanding debt may influence market behavior and policy responses in the years ahead.

Debt Ceiling Increase and Fiscal Impact

The bill raises the federal debt ceiling by $4–5 trillion. It is also projected to add $2.3 trillion to the national debt over a decade, even more when all tax breaks are accounted for.

Rising deficits and debt may influence bond yields, long-term interest rates, and inflation expectations. Fixed-income investors should stay alert.

What Comes Next?

Senate rewrites are on the horizon, and we expect several substantial changes. Some key items likely to be revised or eliminated include:

• The full $40,000 SALT deduction
• Green energy tax credit repeals
• The scope of Medicaid cuts
• Student loan system changes

Negotiations are ongoing. While the president has indicated he wants the final bill on his desk for a signature by July 4, 2025, intraparty disagreements could delay passage. A more realistic timeline would be September.

Investor Action: Stay Agile, Stay Informed

The budget proposal reflects the current majority’s priorities: lower taxes, reduced social spending, and stronger defense funding. While many provisions benefit high-income households and business owners, others may introduce volatility, especially around entitlement reform and deficit expansion.

As the political process unfolds, so will the details. Whether it’s potential tax savings, estate planning strategies, or navigating sector shifts tied to federal spending, now is the time to evaluate how proposed changes may affect your financial picture:

• Revisit estate plans and business structures.
• Consider the implications of temporary tax changes.
• Monitor how spending shifts might impact specific sectors.

Don’t wait until the Big Beautiful Bill is finalized to take action. Schedule time with your Larson advisor to walk through your portfolio, assess your current strategy, and identify opportunities to position yourself ahead of the curve. In an environment of uncertainty, proactive planning is your greatest asset.

[i] https://www.npr.org/2025/05/21/nx-s1-5406392/trump-republicans-tax-bill-reconciliation-medicaid

[ii] https://finance.yahoo.com/news/senate-republicans-plan-release-major-090000831.html

[iii] https://www.forbes.com/sites/martinshenkman/2025/05/11/congress-considering-15-million-permanent-exemption/

[iv] https://www.savingforcollege.com/article/maga-account-money-accounts-growth-advancement

[v] https://www.pbs.org/newshour/politics/whats-inside-the-house-gops-budget-bill-heres-a-look

[vi] https://sbecouncil.org/2025/06/06/whats-in-the-one-big-beautiful-bill-for-small-business-part-i/

[vii] https://www.cbpp.org/research/food-assistance/house-reconciliation-bill-proposes-deepest-snap-cut-in-history-would-take

[viii] https://www.studentloanprofessor.com/student-loan-updates-for-may-2025/

[ix] https://www.airandspaceforces.com/150b-extra-defense-spending-one-off/

[x] https://www.cbo.gov/publication/61459#:~:text=CBO%20estimates%20that%20debt%2Dservice,the%20deficit%20to%20$3.0%20trillion.

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