The Republicans have put together a massive budget reconciliation bill shaking things up for Medicaid, food stamps, student loans, and more. It also aims to extend President Trump’s 2017 tax cuts permanently, which could cost around $3.3 trillion. The One Big Beautiful Bill Act, passed by a slim margin in the House, supports Trump’s policy agenda while also allowing a $4 trillion increase in the debt ceiling.
This bill is a combination of 11 separate committee prints designed to align with the budget resolution’s 10-year financial plan. While it finds over $1.5 trillion in savings, budget analysts warn that if it clears the Senate unaltered, it could still add between $3.3 and $5.2 trillion to the national debt. Most of the expense comes from the Ways and Means Committee’s section, which centers on making the 2017 Tax Cuts and Jobs Act permanent.
The tax cuts include the higher standard deduction for almost all taxpayers and a $2,000 child tax credit. To claim the child tax credit, both parents must have a Social Security number. Additionally, the bill offers a 20% deduction for Qualified Business Income (QBI), which is a boon for American manufacturers by allowing them to deduct 100% of facility improvement costs.
The legislation also takes a swing at large universities by increasing taxes on their endowments and private foundations. Republicans had some heated debates over the state and local tax, or SALT, deduction cap, finally agreeing on a $40,000 limit for those earning less than $500,000 annually. The tax section features many short-term provisions that will expire after four years, like increasing the standard deduction for single and joint filers.
The bill includes temporary changes through 2028, such as eliminating taxes on tips and overtime, making the adoption tax credit partially refundable, and ending interest on loans for American cars. The Ways and Means Committee might have the most expensive portion, but the Energy and Commerce Committee found the most savings, over $988 billion. They achieved this mainly through reductions in the 2022 Inflation Reduction Act and cutting back on Medicaid spending.
Energy and Commerce’s savings involve reclaiming unused funds from the IRA and ending more than a dozen renewable energy subsidies. Several tax credits related to alternative fuel vehicles, home energy efficiency, and clean hydrogen production will be phased out by 2026. The Rules Committee, under pressure from fiscal conservatives, moved the phase-out deadline for the IRA’s clean electricity credits from 2032 to 2028.
Medicaid reforms proposed in the bill include reverting eligibility requirements to pre-pandemic standards and imposing work requirements for able-bodied adults without dependents. The plan also cuts federal funding to Planned Parenthood and prevents Medicaid and CHIP funds from being used for gender transition procedures on minors. The Congressional Budget Office estimates these changes will save hundreds of billions, making 7.7 million current Medicaid recipients ineligible by 2034.
House Democrats heavily criticized the changes to Medicaid, describing them as “cruel.” They also condemned the Agriculture Committee’s section, which saves $230 billion by reforming the Supplemental Nutrition Assistance Program (SNAP). The SNAP reforms require states to contribute more to their benefit cost share and close loopholes that have exempted many able-bodied adults without dependents from work requirements.
Trump’s border security and defense priorities receive significant funding from the Homeland Security, Judiciary, and Armed Services committees’ portions of the bill. The Homeland Security Committee has earmarked $47 billion for the “Border Barrier System,” a technologically advanced southern border wall. Additionally, $5 billion will go towards new U.S. Customs and Border Patrol facilities, and $6 billion for hiring more border agents.
U.S. Immigration and Customs Enforcement will see a $45 billion funding increase for new detention centers. The bill also introduces new fees on immigrants, such as a $1,000 minimum fee for asylum seekers and a $500 fee for those requesting Temporary Protected Status. Sponsors of unaccompanied migrant children will face a $3,500 charge, and many work permit applications will come with a $550 fee every six months.
The Armed Services Committee is putting $5 billion into border security, but most of its $150 billion budget is for military projects like shipbuilding and increasing weapons production. The Transportation and Infrastructure Committee is giving $22 billion to the Coast Guard and $15 billion to the Federal Aviation Administration for infrastructure updates. However, electric vehicle owners will need to pay a $250 annual fee to support the Highway Trust Fund.
The Natural Resources Committee aligns with Trump’s energy goals by expanding oil and gas leasing on federal lands, lowering drilling royalty rates, and reinstating coal leasing. In a final move against the Biden administration, the bill reinforces Trump’s vision for a robust and independent energy sector.
