On July 4th, President Trump signed H.R. 1, the One Big Beautiful Bill Act, into law. The 330-page act contains provisions that will reshape nearly every sector of the American economy and society. The rushed passage and sweeping scope of H.R. 1 have left many wondering:

What’s actually in the bill and how will it affect me?

At Plural, this opacity strikes directly against our mission. From our open data to our AI bill summarizer trained specifically on legislative text, we strongly believe in the power of technology to unlock legislative insights for policy professionals, activists, and citizens alike. With this mission in mind, we are producing a series of One Big Beautiful Bill explainers. Within each explainer, we will dive into the megabill’s impact in a specific subject area with a text-first approach that pulls impacts directly from the bill. This week we take a look at how the new law will impact American healthcare.

Economic and labor policy is constantly at the forefront of political campaigns in the United States in part because a significant number of Americans consistently rank the economy as the nation’s “most important problem.”

At the Federal level, we can find many recent examples of labor policy campaign promises that were delivered on as well as those that weren’t. Each of President Biden’s four major bills — the American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act — delivered on investments in labor he touted during the 2020 campaign. 

Conversely, each of the past three Presidents (and plenty of members of Congress) have pledged to raise the federal minimum wage but every effort in the past fifteen years has failed. 

Throughout the 2024 campaign, President Trump focused on economic messaging and won a sizable share of votes from union households, for a Republican candidate. Trump and Congressional Republicans know they must ask voters to retain their Congressional majorities in 2026 based, in part, on their progress on these very issues. 

Therefore it’s unsurprising that Republicans have returned to campaign-style messaging in touting H.R. 1 as a “pro-worker” bill. To best understand how H.R. 1 will impact the American workforce, we take a look at some of the most significant labor provisions from the bill below. 

No Tax on Tips

Heavily touted within President Trump’s 2024 stump speech was the proposal to end the federal taxation of tips. Section 70201 of the newly passed legislation eliminates federal income taxes on up to $25,000 in tipped income for qualified workers earning less than $150,000 annually (those earning more receive an exemption on a smaller amount of tips). 

While “no tax on tips” sounds simple enough (and makes for a compelling campaign proposal), the details in practice are more complex. The new law only applies to federal income tax and workers will still pay Medicare, Social Security, and state taxes related to this income. 

Further, the administration still needs to define the occupations regularly receiving tips that will qualify for this deduction. 

Finally, unlike other tax cuts within H.R. 1, section 70201 is not permanent and will expire after four years. 

No Tax on Overtime Pay

Coupled with “no tax on tips” in the 2024 campaign was President Trump’s proposal to eliminate federal taxes on overtime pay. Section 70202 of H.R. 1 allows qualifying taxpayers to deduct up to $12,500 in overtime pay from their income subject to federal income tax. Overtime income will still be subject to state income taxes as well as Medicare and Social Security taxes. 

Notably, the portion of overtime pay eligible for this deduction is only the “premium” that employers are required to pay for overtime under the Fair Labor Standards Act (FLSA). If a worker makes $10 per hour and is eligible for overtime, the FLSA requires their employer to pay them $15 per hour for all hours worked over 40 in a week ($10 base pay plus a $5 premium). In this example, only the $5 per hour premium overtime pay could be deducted under H.R. 1’s new allowances. Overtime pay provided for reasons besides the FLSA requirements (like more stringent state requirements or a collective bargaining agreement) would not qualify for this deduction. 

Other Tax Changes Impacting Employee Benefits

Beyond changes to taxes on tips and overtime pay, H.R. 1 makes a few other notable changes that employees could factor into their taxes:

• Section 70404 expands the maximum contribution into a Dependent Care Assistance Program flexible savings account from $2,500 to $3,750 for an individual. Allowing workers with a DCAP benefit to exclude more dependent care expenses from their taxes. 
• H.R. 1 also makes permanent an existing tax credit allowing employers to make up to $5,250 in student loan payments on behalf of employees without an impact to an employee’s income subject to taxation. 

Pell Grants for Workforce Training

Section 83002 of the new law enacts the “Workforce Pell Grant Program,” which will make Pell Grants available to individuals participating in short-term (between eight and fifteen week) job training programs. Like those changes described above, many of the details of this new program will need to be sorted out in forthcoming rulemaking. 

Existing workforce training programs, community colleges, and individuals looking to make a career change or earn an additional accredited degree will certainly be following rulemaking this fall to see what programs may qualify for this new federal assistance. 

Changes to “Safety Net” Programs

It is important to note that the expected benefits to workers described above are dwarfed (in size of spending) by the cuts to federal “safety net” programs like SNAP, Medicaid, and CHIP, as shown in the chart prepared by the Center for American Progress below. 

Advocates on the left have pointed to this disparity in their arguments that the benefits to workers touted by the Administration are far outweighed by the negative impacts on low-income workers relying on government programs for assistance. 

H.R. 1 implements work requirements for Medicaid that are expected to put more than 10 million Americans at risk of losing Medicaid coverage. Despite this massive impact on Medicaid enrollees, the Congressional Budget Office has indicated that this change is only expected to have a marginally positive impact on the size of the labor force. 

Conclusion

While the 2024 Presidential Campaign was unprecedented for a number of reasons, both candidates did follow the established playbook of focusing their policy priorities on jobs and the economy. With H.R. 1, President Trump and Congressional Republicans had their first and best chance to enact policy changes they campaigned on, including those they touted as “pro-worker.” 

While campaign promises can be impactful, they lack the detail of enacted policy. And the details of “no tax on tips” and “no tax on overtime” as implemented by H.R. 1 may leave some workers confused by the limitations of the policies as enacted. Additionally, these temporary tax breaks for certain workers are due to expire just as the most significant cuts to social safety net programs are expected to come into effect and negatively impact low-income Americans. 

As the details of these new policies are defined through rulemaking and as workers begin to feel their impact we should have a better sense of the degree to which voters feel the Administration has delivered on its promise to be “pro-worker.”