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THE HOUSE OF REPRESENTATIVES PASSED 215-214 THE AMENDED VERSION OF THE TRUMP-JOHNSON BUDGET RECONCILIATION BILL.
Nutshell: The legislation provides trillions in tax cuts, with the biggest cuts going to the wealthiest taxpayers, and dramatically increases spending for defense and deportation, while deeply cutting Medicaid, health insurance subsidies, food stamps, and higher education benefits for low-income Americans, and ending federal efforts to contain extreme weather, wildfires, and flooding—all of which explode the public debt by $3 to $5 trillion over 10 years, triggering automatic annual cuts in Medicare.
Top-line numbers:
DEBT INCREASE: The Trump Budget will substantially increase the public debt—worsening an already dangerous fiscal situation. Under current law the debt (held-by-the-public) is already projected to increase from $30 trillion this year to $52 trillion in 10 years. This bill will boost the public debt by an additional $3 to $5 trillion over 10 years due to tax cuts and increases in defense and migrant deportation spending. (The reason for the broad range in deficit estimates is that many of the provisions are temporary in order to hide the long-term costs; if the temporary tax cuts and spending increases become permanent, the debt increase will be at the high end.) Over 30 years, the bill could add $15 trillion to the debt. The bill includes a $4 trillion increase in the statutory debt ceiling.
NEARLY 14 MILLION PEOPLE LOSE HEALTH COVERAGE: 13.7 million would lose health coverage due to $698 million in Medicaid cuts and expiration of expanded premium subsidies under the Affordable Care Act (ACA).
Medicaid cuts include: limiting states’ ability to impose taxes on providers (used to generate higher federal matching funds); imposing work requirements on childless adults without disabilities; allowing states to increase eligibility checks; allowing states to impose up to $35 copayments for people just above the poverty level; using heavy-handed federal penalties to force 12 state governments to drop universal coverage paid for with their own tax dollars; barring states from using Medicaid funds for Planned Parenthood or gender healthcare.
In total, the ACA marketplaces could see a one-third cut in enrollment—8 million Americans losing private health insurance coverage.
For more details on healthcare provisions in the bill, see the KFF Tracker.
MEDICARE CUTS FOR SENIORS AND DISABLED WORKERS: The bill’s deficit increases will trigger $490 billion in automatic Medicare cuts (unless legislation is enacted to block the automatic cuts).
FOOD AID CUTS FOR LOW-INCOME AMERICANS: SNAP Food stamp benefits would be reduced for 5.4 million people – a cut of $267 billion.
The cuts would shift costs onto the states based on payment error rates, impose stricter work and eligibility requirements, disallow eligibility deductions for money spent on home heating and internet access, and limit future updates to food benefits.
CUTS TO STUDENT FINANCIAL AID: The bill cuts student financial aid $349 billion through new federal limits on student loans, Pell grants, and income-based repayment plans.
TERMINATES FEDERAL EFFORTS TO COMBAT EXTREME WEATHER, WILDFIRES, AND FLOODING: The Trump-Johnson budget bill phases out tax incentives to boost clean energy. (This will end U.S. efforts to slow the deepening crisis of extreme weather, frequent wildfires, and severe flooding—at the same time that the Trump Administration is aiming to shutdown FEMA and shift disaster response to state governments.)
In addition to climate damage, the bill’s repeal of clean energy tax incentives could seriously hinder the nation’s ability to meet soaring energy demand and eliminate hundreds of thousands of energy sector jobs. “Electricity demand is forecast to increase up to 16% in the next four years, with 128 gigawatts of new load expected on the grid as the AI race heats up."
OVERALL IMPACT OF THE BILL -- TAX CUTS BENEFITTING THE WEALTHY and SPENDING CUTS HURTING THE POOR: According to the nonpartisan Congressional Budget Office, under the Trump-Johnson budget bill the lowest income Americans would see their income decline by 2 percent in 2027 and 4 percent by 2033 (due to cuts in Medicaid and SNAP), while the highest income Americans would see their incomes increase by 4 percent in 2027 (due to tax cuts weighted heavily in their favor).
The Wharton model estimates the lowest income quintile would see after-tax income cut more than $1,000, while the top 0.1 percent would take home an additional $389.000.
LARGEST TAX CUTS: Overall, the tax bill’s largest provisions would make permanent the 2017 tax law’s lower rates (at a cost of $2.2 trillion); extends the alternative minimum tax exemption ($1.4 trillion); extends and gives temporary election year boosts to the standard deduction ($1.3 trillion) and child tax credit ($797 billion); extends and increases the deduction for pass-through business income ($809 billion); extends the increased estate and gift tax exemption ($212 billion); extends the special depreciation allowance ($148 billion); extends the deduction for certain foreign and global income ($142 billion); temporarily ends taxation of overtime ($124 billion); temporarily establishes a new seniors deduction ($72 billion); and temporarily ends taxation of tips ($40 billion).
SPENDING INCREASES: The bill’s largest spending increases are for defense ($144 billion) and migrant deportation/border security expenses ($141 billion, partially offset by high fees imposed on new legal immigrants).
The leadership amendment made the following changes to the bill:
Cap on the State and Local Tax (SALT) deduction was increased from $30,000 to $40,000 (note: under current law, there is no cap after 2025).
The Medicaid work requirements will go into effect sooner, at the beginning of 2027 – after the midterm elections – rather than 2029 as in the original bill. Also, the provision permitting states to impose up to $35 Medicaid copayments is amended to exempt primary care, mental health and addiction treatment.
The amendment accelerated repeal of clean energy tax credits under the Inflation Reduction Act.
The amendment significantly scales back the $51 billion in budget cuts to federal worker pay and benefits by removing an increase in federal employee retirement contributions, narrowing the FERS annuity supplement, and delaying the start date of several other reforms.
Limits the new tax deduction for American car loan interest by removing its retroactivity.
The amendment allows certain legal immigrants to continue receiving SNAP food aid, including Cuban nationals in Florida.
Eliminates funding for new armaments cooperation program ($250 million).
Border states would get $12 billion for security costs incurred during the Biden Administration.
Ends tax credits for wind and solar energy by 2028 instead of a slower phaseout through 2031.
Renames the new “MAGA savings accounts” to “Trump savings accounts” (this is a $17 billion temporary giveaway of $1000 invested in the stock market for newborns between 2025 and 2029).
Other changes include: removing $1 billion of clean energy project rescissions; restoring a tax exemption for royalty income for sports leagues, universities, and AARP; removing new permitting fees for infrastructure projects; and exempting entertainment from a provision ending the employee meals deduction.
The budget reconciliation bill now goes to the Senate which returns from its Memorial Day recess on Monday, June 2, 2025. Politico reports that “Senate Republicans are vowing they will make changes to President Donald Trump’s ‘big, beautiful bill’ after it passed the House early Thursday morning… Some of the member demands are contradictory, with some fiscal hawks demanding beefed-up spending reductions while others want softening of the House’s Medicaid language and to preserve more green-energy incentives.” House Ways & Means Chairman Jason Smith said he expects the Senate tax provisions to be 90 percent to 95 percent similar to the House version.
During Senate Floor consideration any Senator may offer amendments to change numbers in the bill or strike entire provisions, or use the Senate’s Byrd Rule to have any non-budgetary provisions (or policy changes with “merely incidental” budgetary effects) struck from the bill. Click here to receive a detailed explanation of the Byrd Rule.
THIS WEEK’S MUST READ: The Bond Market Hates Trump’s Tax Bill.
“With the yield on 30-year Treasury bonds again passing the 5% mark on Wednesday, the nation’s creditors injected a dose of harsh economic reality into Trump’s fiscal policy — and not for the first time. Last week, a third bond-rating provider lowered the US sovereign grade, projecting the nation’s debt surging to 134% of the size of the economy in 10 years, from roughly 100% today.”
For daily updates on Reconciliation, see our Reconciliation Tracker: govbudget.com/reconciliation-tracker/.
TRILLIONS WILL RETURN JUNE 9, 2025 WITH A RECAP OF CONGRESS’ FIRST WEEK BACK FROM RECESS.
About the author: Charles S. Konigsberg, J.D., served as Assistant Director at the White House Office of Management and Budget for three successive Budget Directors; General Counsel at the U.S. Senate Finance Committee; Minority Chief Counsel at the U.S. Senate Rules Committee; Staff Attorney at the U.S. Senate Budget Committee; Director of Congressional Affairs at CFPB and CNCS; and Staff Director of a national bipartisan budget task force.
He is author of the book, Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. Click here to purchase.
He is also Publisher of Appropriations.com which tracks appropriation bills; and GovBudget.com which tracks the Reconciliation Bill and major federal developments, by subject area, each day.
Speaking engagements and press interviews can be scheduled by calling: (202) 818-8578 or (301) 509-5688. Email comments, suggestions, and questions to: ckonigsberg@capitolpublicpolicy.com.
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