The OBBBA Showdown: Reshaping U.S. Tax Policy

Exploring the Economic Ripples of the Latest Reconciliation Bill

Doug Crescenzi

01 Jul 2025 — 6 min read

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TL;DR:

Senate to vote today on OBBBA, with House review possible by July 2 and signing targeted for July 4.
Bill extends TCJA tax cuts, raises standard deduction to $16,000 for singles and $32,000 for joint filers and increases Child Tax Credit to $2,500 per child through 2028, while also phasing out clean energy credits by 2027.
SALT deduction cap increases to $40,000 with high-earner phase-out, favoring wealthier households.
Markets like “Will next reconciliation bill lift debt ceiling in 2025?” at 97% signal fiscal sustainability concerns amid Moody’s downgrade.
US Taxation Index at 39.2% suggests tax relief trends, impacting equities and bonds as the bill reshapes economic policy.
Long-tail markets, including “Will Coinbase US perps offer more than 10x leverage?” at 22%, hint at crypto regulation shifts tied to tax policy.

Market Snapshots

Event Breakdown

The Big Beautiful Bill Heads to Senate Vote: This week’s “Event Breakdown” centers on the climactic push for the Republican-led "One Big Beautiful Bill Act" (OBBBA), with the Senate poised to vote shortly and its implications on tax policy. Following its narrow House passage, as we detailed last month, the bill faces a critical juncture. If the Senate approves, the House aims to revisit it by July 2, targeting President Trump’s desk by July 4. Procedural hurdles, including Senate rule compliance under the Byrd Rule, have reshaped the bill, stripping contentious provisions like the "Revenge tax" and federal worker benefit cuts, while addressing Medicaid concerns from some GOP senators. This evolving legislation, tied to prediction markets offers a real-time pulse on fiscal policy.

Tax implications loom large, reflecting the bill’s potential to reshape the economic landscape. The Senate’s June 28 version extends the 2017 Tax Cuts and Jobs Act (TCJA) provisions, raising the standard deduction to $16,000 for singles and $32,000 for joint filers, indexed to inflation. The Child Tax Credit climbs to $2,500 per child through 2028, reverting to $2,000 plus inflation thereafter. The SALT deduction cap rises to $40,000, with a phase-out for high earners above $500,000, escalating annually. Corporate benefits include permanent bonus depreciation and expanded Section 179 expensing, while clean energy credits face phase-outs by 2027. Markets like “Will next reconciliation bill extend income tax cut for high earners in 2025?” and “Will next reconciliation bill end electric vehicle tax credits in 2025?” signal trader sentiment on these shifts.

These changes carry profound real-world implications. Lower individual taxes could boost disposable income, spurring consumer spending, especially if “Trump ends taxes on tips in 2025?” at 98% materializes, benefiting service workers. Corporate tax breaks, tracked by “Will Trump cut corporate taxes in 2025?” at 10.5%, might fuel investment and job growth, though clean energy cuts could slow renewable sector expansion.

The bill’s distributional impact, favoring high-income households, could widen inequality, a dynamic echoed in “Will next reconciliation bill reduce taxes on Social Security in 2025?” at 3%, which may ease burdens on retirees but spark debate over fairness.

Debt markets are equally critical, with “Will next reconciliation bill lift debt ceiling in 2025?” at 97% tying fiscal policy to borrowing capacity. Amid Moody’s recent downgrade, a failure to raise the ceiling could trigger default risks, as seen in “US defaults on debt in 2025?” at 4%. A lifted ceiling might stabilize yields, while tax cuts could pressure deficits, influencing inflation and global competitiveness.

Our US Taxation Index, introduced in May’s “Fiscal Forecast: US Taxation Index and Debt Markets in Focus,” aggregates these trends, weighting high-revenue categories like federal income tax.

A rising index suggests tax relief, potentially lifting equities, while a drop could pressure bonds. Movements in niche markets, such as “Trump abolishes the Federal Income Tax in 2025?” at 6%, though unlikely, highlight speculative extremes. For traders, these signals guide positioning; for journalists, they frame policy debates with data.

The "One Big Beautiful Bill Act" (OBBBA) potential passage by July 4, 2025, could redefine U.S. tax policy for years to come. The extension of TCJA provisions, increased deductions, and corporate tax breaks signal a shift toward tax relief, likely boosting economic activity but widening income disparities. The phase-out of clean energy credits and debates over the debt ceiling highlight trade-offs that could influence fiscal sustainability. The US Taxation Index offers traders and policymakers a lens to anticipate how tax policy might drive growth, reshape markets, and navigate the delicate balance of revenue and expenditure in a high-debt environment.

Related markets & forecasts:

Long-Tail Radar

This week's Long-tail Radar zeroes in on the Polymarket market "Will Coinbase US perps offer more than 10x leverage", a niche yet intriguing barometer. This market tracks the potential for Coinbase’s newly launched U.S.-regulated perpetual futures to exceed the current 10x leverage cap, offering a window into the evolving landscape of crypto derivatives. With odds currently at 22%, traders are speculating on whether regulatory shifts or market demand could push leverage higher, a move that could amplify both profits and risks for U.S. traders.

Related markets, such as “Will Coinbase acquire Circle before September?” (3%) and “Will Tether acquire Circle before September?” (1%), add context. Given Circle’s recent public offering and rising stock, an acquisition by either seems unlikely, yet their stablecoin USDC’s role in settling Coinbase’s futures contracts ties them to this narrative. USDC’s price stability reduces volatility exposure, making it a critical factor in futures trading dynamics. A leverage increase could heighten demand for USDC as collateral, influencing these markets’ trajectories.

Further intrigue comes from “Trump eliminates capital gains tax on crypto in 2025?” (10%) and “Will Trump cut long term capital gains tax in 2025?” (9%). Tax elimination could transform futures trading by boosting post-tax profitability, potentially driving demand for higher leverage as untaxed gains compound. This could strain Coinbase’s regulated clearing infrastructure or spark retail influx, increasing volatility. The interplay between tax policy and leverage limits offers a probabilistic lens for traders navigating these long-tail markets.

These markets hold value for hedge funds seeking early signals on derivatives growth, consultants modeling risk, and traders optimizing USDC-based strategies. The “Will Coinbase US perps offer more than 10x leverage” market, with its modest liquidity, may foreshadow shifts in U.S. crypto regulation and tax policy, turning speculative bets into actionable insights.

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