Major Tax Reform Advances in Congress: Implications for American Taxpayers and Small Businesses

On May 22, the U.S. House of Representatives moved forward with a landmark tax reform package, setting the stage for potential transformation of America’s tax code ahead of the 2025 tax season. Branded as “The One Big Beautiful Bill,” this legislation has now progressed to the Senate, sparking contentious debate across party lines and among tax professionals nationwide.

Key Tax Provisions: What’s Included?

The House Ways and Means Committee outlines several pivotal features in the bill:

A permanent extension of the lower individual income tax brackets introduced by the TCJA.
Continuation of the expanded standard deduction, providing direct benefits for middle-income taxpayers.
Retention of the enhanced Child Tax Credit, albeit not as robust as the temporary 2021 expansion.
Establishes a permanent 20% Qualified Business Income Deduction (Section 199A) for pass-through entities and small businesses.
Reforms to the $10,000 cap on state and local tax (SALT) deductions—a critical issue for taxpayers in high-tax states.

Crucially, the bill forgoes any increases in corporate tax rates or changes to capital gains and estate tax thresholds, keeping the focus on individual and small business tax relief. According to Congressional Budget Office (CBO) projections, the cost of the proposed legislation hovers near $4.5 trillion over ten years.

Stakeholder Responses and Economic Impact

Proponents, including House Ways and Means Chair Jason Smith (R-MO), applaud the reforms, highlighting anticipated economic growth, support for small business owners, and alleviation of tax burdens for working families. As Smith told CNBC, “We’re delivering on the promise of pro-growth, pro-worker tax relief without raising taxes on anyone.”

However, critics—including independent budget watchdogs—argue the extensions risk worsening the federal deficit and disproportionately serving wealthier taxpayers. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, cautioned that “extending these tax cuts without offsets is a recipe for long-term fiscal strain.”

Senate Outlook: Navigating Partisan Divides

The bill’s pathway in the Senate remains highly uncertain. Republican Senators are largely supportive, but opposition from many Democrats—who raise concerns about fiscal responsibility—means the final version will almost certainly undergo revisions. Certain moderate Democrats, particularly those representing states heavily affected by the SALT cap, may be open to compromise. Nonetheless, achieving the requisite 60-vote threshold is expected to demand substantial negotiation, making bipartisan tax reform a formidable task.

Taxpayer & Professional Impact: 2025 and Beyond

If enacted, the legislation would solidify the existing individual income tax rate structure, stave off automatic tax increases, and maintain higher deduction levels for most filers. For small business owners, permanency of the Section 199A Qualified Business Income Deduction represents significant planning certainty—a central ask of the National Federation of Independent Business (NFIB).

On the other hand, some critics contend that the reforms do not do enough for low-income households, and highlight the substantial long-term cost. Tax professionals and CPAs are therefore urging clients to be vigilant as developments unfold, since the outcome will have wide-reaching implications for individual tax planning, small business tax strategies, and overall fiscal management in the coming years.

What Comes Next?

As the legislative process intensifies in the Senate, taxpayers and financial advisors alike are closely monitoring for updates. Any final bill will set the tone for tax filing in 2025—and potentially for the next decade of U.S. federal tax policy.

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