By
Derek Hamilton
May 28, 2025
Congressional Republicans are currently working on a massive tax and spending bill through a process called reconciliation, which allows legislation to pass with limited intervention by the minority party. However, this process must adhere to specific rules over a 10-year window, which can make the process difficult. Congress would like to pass the reconciliation bill, which President Trump has dubbed “The One, Big, Beautiful Bill” (OBBB), sometime in the summer. If they miss that deadline, the pending expiration of the Tax Cuts and Jobs Act (TCJA) at the end of this year should be enough incentive to pass legislation before year end.
Recently, the House of Representatives passed their version of the bill, which in addition to extending TCJA, provides several tax cuts and spending reductions; however, the tax cuts seem to be crafted to provide stimulus over the next few years, while the spending cuts are increasingly backloaded in the 10-year window, providing stimulus now but pain later.
The legislation attempts to meet many of President Trump’s campaign promises regarding tax cuts for US households, including no taxes on tips or overtime, with some restrictions. In addition, several business tax reductions have been included, notably for building factories. Currently, any company that builds a factory must depreciate the asset over the next 39 years, while under the OBBB, companies could immediately expense the full value of the building if it is used for manufacturing, which should incentivize companies to increase manufacturing capacity in the US. The chart below illustrates how companies have been investing in US factories, and the Trump administration would like to see that continue.
If enacted, this legislation could provide a 0.5 to 1% boost to US GDP growth. However, once the House passes the bill it must go to the Senate, which will inevitably want to make changes. Eventually, Republican leadership from both chambers will need to come to” a compromise for the final bill. While it is too early to know the final contents of the bill, we believe it will be reasonably close to the House version, which gives us confidence in a round of fiscal stimulus in 2026. We plan to deal with the implications of this stimulus in future publications.
Private Non-Residential Spending on Manufacturing Structures
Sources: Macquarie, Macrobond, US Census Bureau
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