Republicans have just passed President Donald Trump’s so-called One Big Beautiful Bill, which will cut taxes, slash programs for low-income Americans, ramp up funding for mass deportation, and penalize the solar and wind energy industries.
Oh, and it adds enormously to the nation’s debt — but who’s counting? (Independent analysts are, and they estimate it will add at least $3 trillion.)
The sprawling, 887-page bill, which Trump is expected to sign into law Friday, contains far too many provisions to name here. But to get a better sense of the bill’s impact, it’s worth running down what it does in a few key areas.
The big picture, though, is that Trump is targeting Democratic or liberal-coded programs and constituencies — programs for the poor, student borrowers, and climate change — to cover part (but nowhere near all) of the cost of his big tax cuts and new spending.
Taxes: The current tax rates stick around – plus there’s some new tax cuts
The bill makes a variety of changes to tax law, some of which are about keeping tax breaks set to expire soon, others of which are adding new goodies in the tax code.
1) Making the 2017 Trump tax cuts permanent: In Trump’s first term, Republicans lowered income and other tax rates with his 2017 tax law. However, in a gimmick to make that law look less costly, the new lower rates they set were scheduled to expire at the end of 2025 — meaning that, if Congress did nothing, practically everyone’s taxes would go up next year.
So the single most consequential thing this bill does, from a budgetary perspective, is making those 2017 tax levels permanent, averting their imminent expiration.
That saves Americans from an imminent tax hike, but notably, it just keeps the status quo tax levels in place. So, in practice, many people may not perceive this as a new cut to their taxes.
2) New “populist” tax cuts: The bill also creates several new tax breaks meant to fulfill certain Trump 2024 campaign promises, such as “no tax on tips.” There will be new deductions for up to $25,000 in tip income, $12,500 in overtime income, $6,000 for seniors, and a deduction for interest on loans for new US-made cars. The bill also creates savings accounts for children called “Trump accounts,” in which the government would invest $1,000 per child.
3) Tax cuts for the wealthy and businesses: Wealthy Americans wanting to pay less in taxes have the most to be happy about from this bill, because they benefit hugely from making the 2017 Trump tax cuts permanent.
Other wealthy winners in the bill include owners of “pass-through” businesses (partnerships, LLCs, or other business entities that don’t pay the typical corporate income tax); they get their tax cuts in Trump’s 2017 bill made permanent. Some wealthy heirs stand to gain too, as the exemption from the estate tax was raised to inherited estates worth $15 million).
Affluent blue state residents got a big win. The 2017 Trump tax law had sharply limited a deduction that typically benefited them — the state and local (SALT) deduction, which it capped at $10,000. (People in blue states tend to have more state and local taxes they can deduct.) The new bill raises that limit to $40,000.
Businesses also get some big benefits, as the bill makes three major corporate tax breaks permanent: bonus depreciation, research and development expensing, and a tax break related to interest deduction.
All this, combined with the cuts for programs for poor people, is why many analysts calculate the impact this bill would be regressive overall — it will end up financially harming low-income Americans, and benefiting the rich the most.
The safety net: Big cuts to Medicaid, food stamps, and student loans
Trump has repeatedly promised that he wouldn’t cut Medicaid, and this bill breaks that promise bigly. Its new work reporting requirements and other changes (such as a limit to the “provider tax” states may charge) could end up cutting Medicaid spending by as much as 18 percent. The bill also makes changes to the Affordable Care Act individual insurance marketplaces. Altogether, these provisions would result in 12 million people losing their health insurance, per the Congressional Budget Office.
Food stamps are another target. The Supplemental Nutrition Assistance Program (SNAP) could be cut by as much as 20 percent, due to new work requirements and new requirements states pay a higher share of the program’s cost. One bizarre last-minute provision, aimed at winning over swing vote Sen. Lisa Murkowski (R-AK), seemingly gives states an incentive to make erroneous payments, because states with higher payment error rates get to delay their cost hikes.
Student loans also come in for deep cuts, as the bill overhauls the existing system, ending many repayment plans, requiring borrowers to repay more, and limiting future loan availability.
Clean energy: The bill singles out solar and wind for harsh treatment
Three years ago, with the Inflation Reduction Act, Democrats enacted a swath of new incentives aimed at making the US a clean energy powerhouse. Trump’s new bill moves in the exact opposite direction. It repeals many of Biden’s clean energy benefits, but it doesn’t stop there – it goes further by singling out clean energy, particularly solar and wind, for harsh treatment.
Under the bill, new Biden-era tax credits for electric vehicles and energy efficiency will be terminated this year. Biden’s clean electricity production tax credits, meanwhile, will be gradually rolled back, though solar and wind will see their credits vanish more quickly. The bill also requires clean power projects to start using fewer and fewer Chinese-made components, which much of the industry heavily relies on.
Things could be worse, though. A recent draft of the bill included far harsher policies toward solar and wind, which could have had truly apocalyptic consequences for the industry — but some of them were dropped or watered down to get the bill through the Senate.
Trump’s new spending goes to the border wall, mass deportation, and the military
Counterbalancing some of these spending cuts on the safety net and clean energy, Trump’s bill also spends a bunch more money on two of his own top priorities: immigration enforcement in the military.
About $175 billion will be devoted to immigration, including roughly $50 billion for Trump’s border wall and US Customs and Border Protection (CBP) facilities, $45 billion for expanding the capacity to detain unauthorized immigrants, and $30 billion for enforcement operations. This is a lot of money that will now be devoted to Trump’s “mass deportation” agenda, and the question will now be whether they can put it to use.
The military, meanwhile, will get about $150 billion from the bill, to be used to start construction on Trump’s planned “Golden Dome” missile defense shield, as well as on shipbuilding, munitions, and other military priorities.
The debt: It goes up a whole lot
In the end, Trump’s spending cuts were nowhere near enough to balance out the enormous cost of the tax cuts in this bill. So, estimates suggest, at least $3 trillion more will be added to the debt if this bill becomes law.
Every president this century has come in with big deficit-increasing bills, dismissing concerns about the debt, and the sky hasn’t yet fallen. But all these years of big spending are adding up, and interest payments on the debt are rising. This could make for a significant drag on the economy in future years and make even more painful cuts necessary.
Republicans are betting that the tax cuts in this bill will juice business and economic activity enough to keep the country happy in the short term — and that the cuts, targeting mainly low-income people or Democratic constituencies, are unlikely to hurt them too much at the ballot box.
Update: July 3 at 2:45 pm ET: This piece was originally published on July 2 and was updated after the House’s passage of Trump’s spending bill.
