New Rules for American Workers: Inside Trump’s Domestic Policy Law

President Trump’s new domestic policy legislation, the One Big, Beautiful Bill Act, includes comprehensive changes to tax policy and labor law that are intended to increase take-home pay and workforce participation. The Act does provide the promise of being labor-friendly but ultimately entails complex trade-offs.

What’s New About Taxes on Tips and Overtime?

Employees earning less than $150,000 can now take a deduction (the tax deduction) for tips up to $25,000 and overtime up to $12,500 (double for joint filers). These above-the-line deductions apply from 2025-2028 and are created to assist service and hourly employees. Nonetheless, economists caution that the new tax break for tipping may be a disincentive for wage increases and cement the reliance on tipping. Likewise, tax free overtime may push some to overwork in a constrained wage market without comprehensive wage reforms.

How Does It Support Families and Working Parents?

As of 2026, businesses will be able to deduct 40% of the costs associated with childcare or 50% for small businesses up to $600,000. While the purpose of this policy is to encourage businesses to consider workplace childcare in the past, few businesses have claimed this tax credit which has limited any meaningful impact.

Are There New Benefits for Skills and Education?

Yes. Starting in July 2026, Pell Grants will extend to short term, high demand training programs (150 to 600 hours), aimed at addressing labor shortages in the skilled trades. The bill also allows for employer paid student loan assistance, up to $5,250 to be tax free which will mainly benefit higher income workers at larger firms.