A recent letter from conservatives in Congress urged Senate Republicans to improve upon the One Big Beautiful Bill Act (OBBBA). The letter notably called on the Senate to address the bill’s deficit effect responsibly by increasing spending cuts, avoiding the use of a current policy baseline, and scaling back the expanded cap for deducting state and local taxes (SALT), among other recommendations.
However, since most spending is off the table due to political or procedural reasons, Senate Republicans should prioritize minimizing OBBBA’s revenue loss. A streamlined approach would involve eliminating the non-Tax Cuts and Jobs Act (TCJA) tax provisions and enhancements in the bill, such as the “no tax on tips” policy, and rolling back enhancements to previous TCJA provisions including the expanded pass-through business income deduction.
Of course, the Senate would face opposition from both the administration and House Republicans. But the alternative is to continue the current log-rolling game that produced the costly House-passed version of OBBBA and added or expanded at least 20 tax expenditures, according to my colleague Jack Salmon.
In total, OBBBA’s non-TCJA tax provisions would increase deficit spending by about $1.3 trillion over the next decade — roughly one-third of the bill’s entire revenue loss and over half of its entire cost, assuming many of these provisions expire as currently written. Making these provisions permanent would raise their 10-year cost to $2.2 trillion, as shown in the table below.
Sticking to only the bill’s TCJA policies would save enough revenue to fully extend 100% bonus depreciation, R&E expensing, and EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) — actual pro-growth TCJA policies that the bill currently extends only temporarily — while still reducing the bill’s new deficit spending by more than $700 billion.
Rather than selectively deciding which policies to keep, Senate Republicans would be wise to remove all non-TCJA policies and enhancements. Doing so would lower OBBBA’s overall cost while ensuring permanence of pro-growth policies. This strategy would also make OBBBA’s tax plan much simpler, reduce future debt strains on financial markets, and send a clear message to House Republicans.
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