The Fake Rolex Golden Age
OBBBA not the biggest bumble in U.S. government history, but it's sure close
The last time our government bumbled reconciliation this badly dates back to 1877, when President Rutherford B. Hayes was placed in the White House as payment for ending Reconstruction altogether, paving the way for 100-plus years of institutional racism in the south, Black mass migration to northern urban enclaves, white flight from those cities to the suburbs, the corporatization of American farming, and whatever else we can pile high on that heap of political malpractice.
That was a different kind of reconciliation, of course, but wholly cut from the same cloth woven from yards of stupidity. As I predicted, the Trump effect on the Senate caused the One Big Beautiful Bill Act (OBBBA) to dribble through, with Vice President J.D. “Hillbilly Enemy” Vance casting the deciding vote. With that, Vance stabbed his poor Ohio relatives and neighbors, the hoi polloi he used to ascend to his current blessed state, collectively in the back.
Factum est - it is done, and back to the House for more fat and gristle. Yes, Republicans have done it, something so fascinatingly macabre it should be studied for a century. They’ve managed to both practically shrink the size and scope of government services, while at the same time paying more for it, and raising the deficit to the danger zone of credit default. The transition from President Ronald Reagan’s “City on a Hill” to “Hawking Fake Rolexes on The Hill” is complete. Herald the Fake Gold Electroplated Age. Huzzah.
Specifically, OBBBA forks tax cash over to large and medium-sized businesses that have taken amortized Research & Experimentation (R&E) tax credits since 2021. It allows those expenses to be immediately deductible, in arrears and accelerated. Given, this only applies to U.S.-based companies, but it’s a chunk of change either way. By the way, R&E, differing from R&D, includes costs of software development. Call it Grand Theft Lotto.
Here’s another, and I’d call it a loophole but really it’s a Black Hole that the entire planet could fit through. There’s a current rule regarding Excess Business Loss (EBL) that can be claimed against taxes. This is a personal deduction for owners of businesses that generate a loss but one day expect a profit, and it’s capped at $626,000 for a couple who file jointly and $313,000 for others. Currently, losses above those amounts (EBL) are carried forward as a net operating loss for future years, capped at 80% of taxable income. The following year, the prior year carry-forward EBL is not used in the calculation of the current year EBL, if the business continues to lose money.
OBBBA modifies this rule, retroactive to 2025. This provision allows the prior year EBL to be added into the calculation of the current year’s EBL, meaning businesses that generate a loss year after year could have what the AICPA called a permanent disallowance of business losses until a profit is generated or the taxpayer has other income. The AICPA is the governing body for tax accountants, and it recommended the provision not be included, but there it is. It’s a money launderer’s dream. Call it the Better Call Saul deduction for cash-rich businesses that always lose money.
For EV makers (and by extension, consumers considering buying one), the Clean Vehicle Credit is eliminated, meaning the $7,500 credit for buyers is going to be gone. The deduction for alternative fuel property, energy-efficient commercial buildings, the credit for solar and wind facilities, and zero-emission nuclear power production are either eliminated or curtailed, or denied for non-U.S. taxpayers. Pretty much all these credits and deductions, the ones that survive, are limited to U.S. companies and “foreign-influenced” companies are mostly excluded from benefitting.
For individual taxpayers, the OBBBA extends the previously temporary standard deduction changes and COLA increases, making them permanent. It increases the SALT (state, local, sales and use taxes) deduction from $10,000 to $40,000 with some phase-outs for high earners. That will help taxpayers in places like Massachusetts, California, and other high tax states.
One good boon for college savers: OBBBA has a provision to make tax-exempt distributions from Section 529 (College Savings Plan) accounts to be used for additional education expenses for elementary or secondary school. That SAT tutor can now be paid using school savings funds.
But the rest of OBBBA’s education agenda is to extract cash from private colleges. There will be a 1.4 percent to 8 percent excise tax on on net investment income on colleges and universities with large endowments, based on the ratio of student tuition to endowment, if the school has at least 500 students. Colleges like Harvard, with massive endowments, will pay a lot, as in $212 million, according to the Senate Finance Committee’s estimate.
As for cuts, about $930 billion in Medicaid reductions over the next 10 years are in the bill. They (the Trump sycophants) say it is all fraud, waste, and abuse, but in reality, there’s a lot of baby that’s being thrown out with the bathwater. Also, ACA premium assistance (Obamacare) is cut by around $230 billion, leading many states to trim their plans and increasing the number of Americans without health insurance.
One that I agree with, a 1 percent tax on remittances, meaning money sent out of the country to family abroad, will be enacted, that will hit money service businesses (MSBs). I don’t think the government will see most of that money, as many smaller MSBs that cater to illegal immigrants operate on a cash basis, and probably have ways of hiding their activities (as in money laundering). But fintechs and other companies that deal with the unbanked population will be hit hard.
In essence, the combination of spending cuts and new taxes created by the OBBBA will keep the lower, poorer classes of Americans low and poor, by limiting their economic opportunities, reducing services available for healthcare, education and jobs, while making life more expensive in general to keep them poor. In other words, the Hillbilly Elegy folks that produced J.D. Vance are being crushed by J.D. Vance.
Meanwhile, the middle class and more wealthy Americans will get more cabbage from the government. But don’t worry, because tips will no longer be taxable, so you can keep that waitress job while you struggle to feed your kids, young unmarried Appalachian mom.
Don’t get me wrong. Democrats would do similar things, but in a different way. The Abundance Agenda doesn’t care about debt, or spending, as long as the favored people get the money. Progressives are grinding toward a utopia of mediocracy and poverty. The Trump-led GOP was supposed to usher in a new Golden Age, but they haven’t.
Republicans have sold America a cheap fake Rolex, and in the process, they’re moving the country closer to financial peril. They should all do what Sen. Thom Tillis did and retire immediately. Or in 2026 we can help them retire.
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The tax on tips reprieve is a 3 year deal expiring in 2028. We will not forget the rest of this mess, and we will note vote for anyone who pushes it down our throats.
As usual you try to keep your comments and analysis pretty well balanced but I can find many experts who I trust that disagree with you – especially on the matter of Medicaid provisions. And you took some cheap shots at J. D. Vance that I think were almost Susan-like uncalled for.
The effect of budget legislation on the economy is complicated and nearly all who speculate on it are wrong. In this case, there was far more “horse trading” than usual. The primary complication was blue state Republicans who wanted to assure reelection by greatly increasing the SALT deductions. That would gift the blue states millions of more tax dollars to fight Trump’s policies including his war against sanctuary local governments and deportations. Debt hawk Republicans were next on the list. Amazingly, the Senate parliamentarian overruled some of the avenues of reasonable compromise. Most compromises suck. This one more so.
Wishful thinking I know, but surely the Congress can pass and abide by legislation that governs the budget process and requires a few essential budget priorities be addressed and settled before arguing over the leftovers.
A little off subject but if Trump could step up his deportation efforts, health care might be more available to those who have trouble affording it. Legal immigrants are expected to be self-sufficient. Our public facilities are overloaded by illegals. There is talk of building a Spanish language high school in Dalton GA. Good grief. Speaking from personal experience in northeast Georgia, when Obama (who deported hundreds of thousands) was President, weekend visits to the emergency room with my mother, my brother and my wife turned into six-hour ordeals. The waiting rooms were filled up with Spanish speaking families with three or four elementary school or younger kids.