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The US Senate has barely adopted the extensive tax and expenditure legislation of President Donald Trump, known as the ‘One Big Beautiful Bill’. The bill, which expands many provisions of the 2017 tax cuts, includes significant reductions of taxes, increased military and border security expenditure and substantial cuts on social programs such as Medicaid. Vice-president JD Vance released the Tie-breaking vote in a decision of 51-50 and sent the bill back to the parliament for further consideration.
This piece of legislation is one of the most important tax reforms since the tax cuts that were implemented in 2017, and the Passage represents the peak of years of negotiation and compromise. The measure is intended to tackle both tax health in the long term and direct policy goals such as national security and defense. After the approval of the Senate, analysts focus their attention on the potential economic impact and implications for both companies and consumers.
Most important provisions of the bill
The provisions of the bill are drastic and have tackled several aspects of the federal tax policy, with a certain focus on the following areas:
1. Tax cuts and reform of corporation tax
The core of the “One Big Beautiful Bill” is a series of tax cuts aimed at stimulating economic growth, in particular by stimuli for companies. The bill expands the tax cuts of 2017, which initially reduced the rate of corporation tax from 35% to 21%. According to this legislation, the rate of corporation tax remains at 21%, but additional measures include extensive tax stimuli for research and development (R&D) and new deductions for small companies. These provisions are designed to encourage innovation, investments in the domestic economy and the creation of jobs.
For individual taxpayers, the bill expands the tax cuts of 2017, which reduces the rates for income tax on different income. It also includes an increase in the standard deduction, which can benefit families from the middle class by reducing their taxable income. However, some earners with a high income have expressed their concern that these tax cuts will be compensated by future tax increases, in particular because the government tries to balance the increasing debt.
2. Expenditure for national defense and border security
In a reflection of the focus of the administration on national security, the bill assigns $ 350 billion to border security initiatives. This includes financing for the construction of extra barriers along the border between the US and Mexico, together with increased technological support for border patrol agents. The military budget also sees a substantial increase, in which the bill admits $ 200 billion in the coming five years to modernize the armed forces and to improve the defense capacities.
Although the rise in defense expenditure is expected to receive two -part support, the concern about future budget deficits. Critics of the bill claim that the tax impact of the bill may not be sustainable, especially if economic growth does not correspond to projections.
3. Cuts to social programs
The most controversial element of the bill are the deep cuts on law programs. In the following decade, the bill requires $ 1.2 trillion for reductions of programs such as Medicaid, Food Aid and Housing Grant. It is expected that these cutbacks will disproportionately influence Americans with a low income, in particular those who rely on these programs for healthcare and support.
The reason for these cutbacks is to reduce the total deficit and to guarantee tax sustainability in the long term, but opponents of the bill claim that they will harm vulnerable population and undermine the safety net for millions of Americans. Some claim that these cutbacks can lead to social unrest in the long term and increased pressure on local authorities to step in and provide services.
4. Increase in debt ceiling
The bill also increases the American debt ceiling with $ 5 trillion to cover the financial obligations of the government. This step, which was needed to prevent a standard on government debt, has attracted considerable attention. With the debt ceiling now higher than ever before, the federal government can continue to borrow money to finance its activities. However, economists warn that this increase, although necessary in the short term, can worsen long -term tax challenges, because the US continues to carry out large budget deficits.
Market reactions to the approval of the bill
After the approval by the Senate of the bill, stock markets initially saw a positive response, with indices such as the S&P 500 and Nasdaq Record Highs. Investors welcomed the expansion of tax cuts and corporate -friendly provisions, which were seen as a boost for the profitability of companies.
However, the impact of the bill on inflation and interest rates is a concern for many market analysts. The increase in government spending, in particular in the field of defense and border protection, in combination with the expansion of tax reductions, can lead to higher levels of government loans. This can in turn put pressure on the interest rates, especially when inflato -rough pressure starts to rise.
Financial analysts have noted that, although the immediate market response has been favorable, caution has been brought about how the bill will influence tax health in the long term. Many keep a close eye on the response of the Federal Reserve to potential inflationary risks and how this can influence the wider economy.
The response of the Federal Reserve
Federal Reserve chairman Jerome Powell has tackled the situation in a recent speech, which states that the Central Bank would continue to follow the economic data and adjust its policy if necessary. Powell emphasized that although economic growth has been strong, the primary care of the FED controls inflation. Although some analysts believe that the FED could tend to stimulate interest rates to stimulate economic growth, Powell made it clear that the FED would act carefully, which would make the need for economic expansion with inflation control in balance.
The approval of this bill will undoubtedly influence the future decisions of the FED, especially if the increased expenditure and tax reductions lead to higher inflationary pressure. As it looks now, the FED is expected to retain his data -driven approach, making decisions on a case -by -case basis.
Challenges in the house and the next steps
The bill is now sent to the House of Representatives, where it is confronted with a more challenging route. While the Senate -controlled Senate controlled by the Republicans managed to penetrate the relative convenience, some moderate Republicans in the house have expressed concern about the general tax impact of the bill. Moreover, Democrats are likely to reduce the cutbacks on social programs, making it unclear whether the bill will endure in its current form.
Chairman of the Kevin McCarthy House has indicated that although the house can approve tax cuts and defense expenditure, there can be adjustments to the cutbacks on the social program. A definitive mood is expected before the holiday of July 4 and the negotiations are expected to intensify in the coming days.
Long -term implications for the economy
If the bill passes the house and becomes the law, the long -term implications for the economy will largely depend on the assets of the administration to deliver its growth projections. Some analysts remain hopeful that the tax reductions will stimulate business investments and job growth, whereby the risks of increased loans are compensated. However, others warn that rising debt levels and cuts on essential services can have negative consequences for the economy in the future.
Conclusion: a historical moment for American tax policy
The passage of the “One Big Beautiful Bill” is a historic moment for the American tax policy, with far -reaching implications for the economy, markets and the American public. While legislators continue to debate about its provisions, the future of this historical legislation will depend on the assets of both the Senate and the house to reconcile their differences and to agree on a definitive version.
