Why Congress is advancing a “meh” tax bill—and why it still matters

This year’s most underwhelming piece of legislation might also be one of its most consequential. The Senate recently passed a modest tax bill that neither excites markets nor satisfies progressives or conservatives. With a slight increase in the child tax credit and some revived business incentives, the package seems engineered more to avoid criticism than to make meaningful reform.

And yet—it’s moving. Quietly, deliberately, and without much fanfare. In an era of legislative gridlock and political showmanship, this kind of bill has a certain perverse value. It represents the politics of “not blowing things up.” In Washington, that now qualifies as progress.

At its core, the bill is a modest fiscal stopgap. It increases the maximum Child Tax Credit (CTC) from $2,000 to $2,200 starting in 2025 and indexes it to inflation thereafter. By contrast, the more generous House proposal raised the credit to $2,500—but only through 2028. After that, it would drop back to $2,000 with inflation indexing.

This difference isn’t just about math. It reflects two competing strategies:

• The Senate’s approach is longer-term but less generous—aiming to lock in a sustainable baseline.
• The House’s approach is front-loaded and more politically appealing—but kicks the harder decisions further down the line.

Lawmakers also reintroduce expensing provisions for business capital investments, boost low-income housing credits, and reinstate some research and development tax preferences that lapsed in 2022. These items are unlikely to move public opinion—but they help preserve ties with industry, small business coalitions, and moderate lawmakers looking for economic wins.

Few lawmakers are passionate about the bill. But few want to be blamed for opposing it. In political terms, it’s structured to be “unoffensive”:

• For families, it prevents the CTC from reverting to $1,000 in 2026—a move that would hit millions of middle-class taxpayers.
• For businesses, it restores familiar perks without dramatically raising the deficit.
• For lawmakers, it offers just enough to campaign on without requiring deep compromises.

In other words: It’s the tax equivalent of passing a budget resolution—necessary, dull, and designed to prevent a larger political firestorm.

This bill isn’t solving America’s fiscal dilemma. It’s avoiding it. The real tax reckoning will arrive in 2026 when the Trump-era tax cuts expire. If Congress does nothing, rates will jump for individuals, estates, and small businesses.

This sets up a dramatic political collision:

• Republicans want to make those 2017 tax cuts permanent—especially the lower individual income tax rates.
• Democrats want to preserve middle-income relief but raise taxes on corporations and high earners.

This “meh bill” does nothing to resolve that core tension. It simply extends certain credits and deductions in ways that maintain the status quo. It postpones the tough choices that will define America’s fiscal direction for the next decade.

Passing a tax bill—even a mediocre one—has political benefits. It allows lawmakers to claim credit for:

• Helping working families
• Supporting small businesses
• Ensuring tax “certainty” for 2025

And just as importantly, it prevents attack ads about “letting families suffer” or “killing job creators.” In this context, modest tax action is more about optics than economic strategy. But there’s a cost: incrementalism. As one Senate aide reportedly noted, “No one is thrilled about this package. But it’s worse to do nothing at all.”

That sentiment encapsulates the moment: lawmakers acting not out of vision, but to avoid political vulnerability.

Who Gains?

1. Middle-income families with children
The expanded child tax credit (CTC) mainly benefits middle-class households with qualifying children and sufficient tax liability to use the credit. The indexing for inflation will preserve its value longer-term—albeit at a lower base than some advocates hoped.

2. Capital-intensive businesses
Firms that rely heavily on equipment, machinery, or long-term assets benefit from the return of full expensing. This is particularly valuable to manufacturers, logistics firms, and real estate developers who can accelerate deductions and improve near-term cash flow.

3. Lawmakers in tight races
Politicians looking for bipartisan wins in competitive districts can now point to this bill as evidence of “getting something done.” That symbolic value may outweigh the actual economic benefit.

Who Gets Left Out?

1. The lowest-income families
Because the CTC remains only partially refundable, the poorest households receive little or no benefit. An opportunity to make the credit fully refundable—thus reaching more families in poverty—was left on the table.

2. Wage earners vs. asset owners
The bill continues to favor capital over labor. Business expensing provisions reward those who invest in equipment and infrastructure—not those who hire or raise wages.

3. Advocates of real reform
Those hoping for major changes in tax structure—such as closing corporate loopholes, taxing unrealized gains, or reducing preferential treatment for carried interest—will find nothing to celebrate.

Passing this bill creates short-term clarity. Families know what to expect in 2025. Businesses regain some planning tools. But it doesn’t fix—or even seriously address—the deeper problems:

• America’s growing deficit
• The expiring Trump-era tax cuts
• Rising inequality embedded in the tax code

In fact, by extending current structures, it may entrench them further. That could make future reform harder.

For investors, the fact that Congress can still pass even a limited tax bill suggests basic legislative functionality. That matters. With recent fears over shutdowns, debt ceiling fights, and extreme partisanship, the bill becomes a modest signal of policy stability. Bond markets, in particular, are watching fiscal signals closely as interest payments on U.S. debt rise. A non-catastrophic tax package that maintains revenue neutrality—or close to it—is a welcome (if tepid) reassurance.

This bill sets the stage for an epic 2026 debate when the Trump tax cuts expire. Nearly every provision in that 2017 package—individual rates, pass-through deductions, estate tax thresholds—is set to vanish unless Congress acts.

If this year’s bill is any indication, lawmakers are still far from a consensus. The tax battles to come will be far more consequential—and far more divisive—than this placeholder legislation.

There’s something unsettling about a tax bill that passes primarily because no one wants to be seen opposing it. It’s not a triumph of bipartisan policymaking. It’s legislative inertia wrapped in political camouflage. That doesn’t make it worthless. This bill prevents immediate disruptions to families and firms. It keeps the machinery of tax administration moving. But it also reveals how far we’ve drifted from proactive governance. Lawmakers are treating policy like risk management, not opportunity design.

In that sense, this “meh tax bill” is a symptom of Washington’s deeper challenge: fear of boldness. Everyone knows 2026 will require real decisions. No one wants to move first. Until then, we’ll get more placeholders. More delays. More technically necessary, politically convenient mediocrity. That might be safer in the short run. But over time, it erodes confidence—not just in tax policy, but in the ability of the political system to solve hard problems before they become full-blown crises.