Tax legislation backed by Trump clears significant barrier – financial markets react favorably with modest uptick
The US Senate has approved a major tax and spending package, known as the One Big Beautiful Bill, after an overnight session. The bill, championed by President Donald Trump, was passed with a narrow margin, requiring Vice President J.D. Vance to cast a tie-breaking vote.
The bill includes permanent extensions of the income tax cuts from the 2017 tax law, an increased Child Tax Credit to $2,200 (Senate version), tax breaks on tipped wages, temporary suspensions of taxes on tips and overtime, and other tax deductions such as on car loan interest for new US-assembled cars and extra deductions for seniors.
The bill has caused significant division within the Republican party. Three Republican senators broke ranks and voted against it, expressing concerns over its impact on healthcare spending and the growing federal budget deficit. The Congressional Budget Office estimates the bill would add over $3.9 trillion to the US budget deficit, contradicting White House claims that the bill would reduce spending.
The bill includes deep cuts to Medicaid and expanded deportation efforts, which have been part of the contention among lawmakers. Sen. Thom Tillis notably criticized the bill, warning that many North Carolinians would lose healthcare coverage because of its provisions.
While specific stock market reactions are not detailed, the bill’s tax cuts and business incentives, such as preserving the 21% corporate tax rate and promoting infrastructure spending, have been praised by industry leaders. The package is seen as transformative for workers, farmers, small businesses, and critical infrastructure funding.
However, the long-term fiscal impact remains a major source of controversy. The move to fund tax cuts with cuts to social programs has drawn sharp criticism from Democrats. There are concerns within the Republican ranks that the bill does not go far enough in cutting spending.
The Republicans aim to get the package to Trump's desk before July 4th, the American Independence Day. However, the bill must now go back to the House of Representatives due to Senate amendments. In the long run, the fiscal imbalance of the United States could worsen, posing risks to interest rate developments, currency stability, and the investment climate.
Notably, tech billionaire Elon Musk has criticized the bill on social media and threatened to politically attack Republican lawmakers who vote for it. His criticism is largely due to the removal of subsidies and mandates favoring the electric vehicle industry.
After the bill is approved by the House, it will be presented to President Trump for signing. Investors should not rely solely on Wall Street but look for alternatives in Europe. DER AKTIONÄR addressed this topic in issue 26/25, which can be accessed here.
- The tax and spending package, known as the One Big Beautiful Bill, includes permanent extensions of the income tax cuts from the 2017 tax law, tax breaks on tipped wages, and investments in infrastructure, all of which have been welcomed by industry leaders in the finance and investing world.
- The bill, despite its potential positive impact on the stock-market and businesses, has drawn criticism from Democrats and some Republican lawmakers due to concerns about its long-term fiscal impact and the growing federal budget deficit, particularly the move to fund tax cuts with cuts to social programs.
- As the bill goes back to the House of Representatives for approval, tech billionaire Elon Musk has expressed disapproval, threatening political retaliation against Republican lawmakers who vote for it due to the removal of subsidies and mandates favoring the electric vehicle industry, adding an extra layer of political news and intrigue to the approval process.
