HR-1-115
Became Public Law No: 115-97.
What it does
This law restructures the federal tax code for individuals and businesses. For individuals, it reduces the number of tax brackets from seven to four, nearly doubles the standard deduction, eliminates or limits many itemized deductions (including capping the state and local tax deduction at $10,000), expands the child tax credit, and doubles the estate tax exemption. For businesses, it cuts the corporate income tax rate from 35% to a flat 20%, allows immediate 100% expensing of certain business property, and creates a new 25% maximum rate on pass-through business income. Most individual provisions are set to expire after 2025, while the corporate rate reduction is permanent.
Who benefits
Corporations and their shareholders, who receive a permanent rate cut from 35% to 20%. Pass-through business owners (partnerships, S corporations, sole proprietors) who gain a new 25% maximum rate on qualified business income. Higher-income households who benefit from the raised estate tax exemption and reduced top bracket threshold. Families with children who benefit from the expanded child tax credit. Small businesses gaining expanded expensing and simplified accounting rules. Homeowners in low-tax states who are less affected by the SALT cap. Members of the Armed Forces who retain moving expense deductions. Parents using 529 plans for K-12 private or religious school tuition. Individuals with disabilities who gain expanded ABLE account access.
Who is hurt
Taxpayers in high-tax states (e.g., California, New York, New Jersey) who lose most of the state and local tax (SALT) deduction above $10,000. Homeowners with large mortgages above $500,000 who lose a portion of the mortgage interest deduction. Individuals who previously itemized deductions for unreimbursed employee expenses, medical expenses, alimony payments, or moving costs. Employees who receive employer-provided dependent care assistance or adoption assistance (after 2022). Taxpayers who relied on the Lifetime Learning credit or student loan interest deduction. Retirees and disabled individuals who lose the credit for the elderly and disabled. Electric vehicle buyers who lose the plug-in vehicle tax credit. Charities that may see reduced donations as fewer taxpayers itemize. State and local governments that may face pressure as residents bear higher effective tax burdens. Future taxpayers who may face higher deficits if individual provisions are extended beyond their 2025 sunset.
Supporters argue
Supporters argue that cutting the corporate rate from 35% to 20% made U.S. businesses more competitive globally, as the prior rate was among the highest in the developed world, and that the Tax Foundation estimated the law would grow GDP by 1.7% over the long run. They contend that nearly doubling the standard deduction simplified filing for tens of millions of households and that the expanded child tax credit directly reduced the tax burden on working families. Supporters also argue that 100% immediate expensing incentivizes domestic business investment, and that post-enactment data showed wage growth and business investment increases in 2018, though economists debate how much is attributable to the law.
Opponents argue
Opponents argue that the law's benefits were skewed toward corporations and high-income households, citing Tax Policy Center analysis showing the top 1% of earners received roughly 20% of the total tax reduction in 2018. They contend that making the corporate rate cut permanent while sunsetting individual provisions in 2025 structurally prioritizes business interests over working families, and that the Joint Committee on Taxation projected the law would add approximately $1.46 trillion to the federal deficit over ten years. Opponents also argue that the $10,000 SALT cap disproportionately raised effective tax burdens on middle-class homeowners in high-cost states, functioning as a geographic tax increase for millions of households.
Constitutional context
The Origination Clause (Art. I, §7, cl. 1) requires revenue bills to originate in the House; this bill did originate in the House, satisfying that requirement. The Taxing and Spending Clause (Art. I, §8, cl. 1) provides the foundational authority for the income tax changes, and the Sixteenth Amendment authorizes the income tax without apportionment. The bill's pass-through and corporate provisions do not raise unresolved realization questions under Moore v. United States (2024), as they tax realized income; no active constitutional tension is implicated.
Checks and balances
Congress gains broad authority to restructure tax obligations for individuals and corporations; the Executive Branch (IRS/Treasury) implements and enforces the new rules through rulemaking, while courts retain authority to review specific provisions — such as the SALT cap or pass-through rules — under Due Process or Origination Clause challenges.
Historical precedent
The Tax Reform Act of 1986, signed by President Reagan, similarly restructured individual and corporate tax rates, reduced the number of brackets, and eliminated many deductions — and is considered the most comparable prior overhaul of the federal tax code.