Lean Finance and Operations

Today in 2025, the United States introduced a sweeping new tax reform, widely known in political circles as the “One Big Beautiful Bill.” While it makes headlines for its bold price tag and political implications, the bill’s real-world effects are now rippling across American industries, particularly in manufacturing.

For many manufacturing leaders, the bill presents both opportunities and uncertainties. With new rules on investment write-offs, research tax credits, and clean energy funding, companies are reevaluating their strategies across the board, from capital expenditures to supply chain management. As someone who has worked closely with manufacturing teams and financial leadership for years, I believe this reform represents a true turning point for the sector, albeit with significant consequences.

Let’s explore the most important pros and cons of this tax reform from a manufacturing lens.

The Bright Side: Where the Bill Helps

1. Immediate Expensing for Capital Equipment

One of the headline wins for manufacturers is the revival of full bonus depreciation—commonly known as immediate expensing. Under the new reform, companies can fully deduct the cost of capital investments (such as new machinery, tools, and production lines) in the year of purchase, rather than spreading the deductions over time.

This is huge. Manufacturing is a capital-intensive game. For small and mid-sized firms, especially, this immediate write-off helps preserve cash flow, increase return on investment (ROI), and encourage upgrades to automation.

Former Emerson CEO David Farr, a vocal supporter of pro-growth tax policy, once said:

“Immediate expensing gives manufacturers the fuel to reinvest in America—and in jobs.”

(National Association of Manufacturers, 2020)

2. R&D Deductions Are Back

Another welcome change is the temporary repeal of the 2022 requirement to amortize domestic research and development (R&D) costs over five years. Now, through 2029, companies can again fully deduct U.S.-based research expenses in the year they occur, creating more room to invest in robotics, process improvements, and product innovation.

Manufacturing is no longer just about metal and machines—it’s about data, software, and materials science. The ability to deduct R&D right away means companies can double down on innovation without worrying about long-term tax drag.

3. Stable Corporate Tax Rate

The reform maintains the 21% corporate income tax rate, which has been a cornerstone of manufacturing competitiveness since 2017. For large manufacturers competing globally, maintaining a steady rate offers long-term predictability and reassurance.

The Downside: Where the Risks Lie

1. Clean Energy Credits Cut Back

Perhaps the most contentious aspect of the new law for the manufacturing sector is the rollback of clean energy tax credits. These credits, part of the 2022 Inflation Reduction Act, had spurred massive investment in solar panels, EV batteries, wind turbine components, and more.

Now, many of those credits are being phased out or narrowed, especially if a project relies on parts from China. This move could slow the clean energy transition and lead to the cancellation or delay of new factory builds in rural and industrial areas.

Energy policy expert and climate economist Dr. Leah Stokes warned in her research that:

“Weakening clean manufacturing incentives puts U.S. leadership in climate innovation at risk.” (Stokes, 2023, Oxford University Press)

2. International Tax Burden Is Growing

Another challenge is the planned increase in international tax provisions such as GILTI (Global Intangible Low-Taxed Income) and BEAT (Base Erosion and Anti-Abuse Tax). These changes are aimed at preventing profit shifting and offshore tax games, but they could also make it more expensive to operate global supply chains.

According to Kris Rogers, a global tax advisor at Ernst & Young:

“The GILTI and BEAT hikes could raise multinational manufacturers’ effective tax rates by several percentage points. That’s significant when margins are already tight.” (Thomson Reuters Tax News, 2025)

3. Long-Term Uncertainty Over Federal Support

The reform is expected to cost roughly $4 to $5 trillion over the next decade, according to independent budget offices. Since much of it is deficit-financed, experts predict eventual cuts to public programs, including those that benefit manufacturing, like infrastructure, workforce training, and small business grants.

That’s a longer-term concern, but not a distant one. A shrinking pool of government support could harm regional development and hinder smaller manufacturers’ efforts to scale up.

So, What’s the Bottom Line?

The 2025 tax reform is a mixed bag for U.S. manufacturers. In the short term, there’s real upside—especially in investment and innovation. The ability to immediately expense equipment and deduct R&D costs helps unlock capital and accelerate growth.

But the long-term landscape is less certain. The rollback of clean energy credits, the rise in international tax exposure, and looming pressure on federal spending all create strategic and financial risk for manufacturers, especially those trying to grow green, global, and fast.

The most successful companies will be those who act boldly now but plan cautiously for tomorrow.

As former U.S. Department of Commerce economist Susan Helper has said:

“Good policy is only half the story. It’s how companies respond that shapes the future.”

(Commerce Department Report on Industrial Strategy, 2021)

Disclaimer

The views and insights shared in this article are for informational purposes only and do not constitute legal, tax, or financial advice. Please consult a qualified professional regarding your specific situation or business needs.

References

1. National Association of Manufacturers & EY. (2025). Impact Analysis of 2025 Tax Reform Provisions on U.S. Manufacturers. https://nam.org
2. Stokes, L. C. (2023). Short Circuiting Policy: Interest Groups and the Battle Over Clean Energy and Climate Policy in the American States. Oxford University Press.
3. Proskauer Tax Talks. (2025). The One Big Beautiful Bill – Tax Reform Summary. https://www.proskauertaxtalks.com
4. Rogers, K. (2025). Expert Commentary in Thomson Reuters Tax News. https://tax.thomsonreuters.com
5. Axios. (2025). IRA Manufacturing Exclusive: Tax Reform Rollbacks and Energy Jobs. https://axios.com
6. Bipartisan Policy Center. (2025). Explainer: The 2025 Tax Debate—Corporate Rates & Pass-Throughs. https://bipartisanpolicy.org
7. U.S. Department of Commerce. (2021). Industrial Policy & Strategy Report. https://www.commerce.gov
8. Duane Morris LLP – Major Federal Tax Legislation Moves Forward: Panic? No; Predict? Maybe; Plan? Absolutely. https://www.duanemorris.com/alerts/major_federal_tax_legislation_moves_forward_panic_no_predict_maybe_plan_absolutely_0921.html
9. Voters Have a Problem With Authority – The Capitalist. https://thecapitalist.com/voters-have-a-problem-with-authority/
10. Alvarez, R., Debnath, R., & Ebanks, D. (2023). Why don’t Americans trust university researchers and why it matters for climate change. PLOS Climate, 2(9), e0000147.