Tax Provisions of the House-passed ‘One Big Beautiful Bill’: Impact on Low-Income Families with Children

"The limited reach of OBBB’s CTC expansion appears poorly understood."

This is the fourth and final post in a series on current Congressional debates over benefits to low-income children.

Summary

  • The House‑passed “One Big Beautiful Bill” (OBBB) tax section preserves Trump‑era tax breaks slated to expire and layers on new cuts.
  • In 2025, when most new OBBB cuts are implemented but before the Trump-era Tax Cuts and Jobs Act (TCJA) expires, I estimate that OBBB’s tax provisions will leave child poverty unchanged. Although the new tax cuts would slightly decrease child poverty, that gain is erased by restricting Child Tax Credit eligibility for U.S. citizen children with undocumented parents.
  • OBBB’s proponents tout several new tax breaks for low‑income working families—exempting tips and overtime pay from income taxation, creating a deduction for car‑loan interest, and expanding the standard deduction for seniors. In practice, these changes bypass lower‑income families: a typical household with children must earn nearly $50,000 before gaining even a dollar in benefits from these provisions.
  • In 2026, OBBB’s tax provisions would cut child poverty by 5 percent, according to my projections. This child poverty reduction comes from preserving expiring tax breaks in TCJA, not from the new cuts in OBBB. In fact, I project OBBB has the same poverty‑reducing effect as a bill that only extends the TCJA, despite the OBBB’s broader tax cuts.
  • Tax provisions in the bill are the only part that increase benefits for lower-income families. OBBB’s large cuts to Medicaid and SNAP will undoubtedly cause an overall increase in child poverty, as the tax benefits for low-income families are modest.

Connected Tooling:
Cash Transfer Microsimulations