Every piece of legislation is about making choices. This one did, in spades. The One Big Beautiful Bill Act spans almost as many pages as War and Peace and it covered way more than taxes. Viewed from 30,000 feet, it really represents a large set of choices that ultimately result in big cost shifts for all of us.
On the tax front, it almost goes without saying that higher-income households and small business owners made out the best. The special deduction given to pass-through business owners was made even more generous and is now permanent. And, the cap on the deduction of state taxes and property taxes was also raised significantly. These two changes, among others tax items, exclusively help high earners.
For moderate-income households, the tax picture also improved for some. New deductions were added for tips and overtime pay. And, seniors also got an added deduction that’s designed to offset taxes paid on Social Security benefits. Those were Trump’s campaign promises, after all, so they weren’t a big surprise to see.
Now, for lower-income households this bill was disappointing. For example, the child tax credit was increased by $200 per child. But, for the millions of households with little or no federal tax bill — due to the fact that they don’t earn enough money — they won’t see any of that extra $200. Given the tax cuts others will receive, that policy choice is hard to understand.
Added to that small insult for the poor is some real injury. The bill imposes some impactful changes to both Medicaid and the SNAP food program. There are added work requirements for some people and some new administrative hurdles to leap just to stay eligible. For some, they will even face added out-of-pocket costs.
These changes are expected to affect millions of households over the next decade. Importantly, states will now be responsible for covering a portion of the costs of both programs — expenses they don’t currently have budgeted. Almost certainly, states will trim both Medicaid and SNAP benefits to close the gaps. Ironically, this will likely hurt “red” states the most, even though the bill was passed exclusively by Republicans.
Climate policy took a hit, too. The bill eliminated a lot of energy efficiency incentives that were introduced only a few years ago. The tax credits provided for installing energy-efficient upgrades to homes will be gone by the end of the year and the tax credit provided for buying an electric vehicle will be gone by October.
Overall, it’s safe to say that this bill widens the gap between households with means and those without. It’s also fair to say that when budget discipline was imposed, support for low-income families was the first item on the chopping block.
Let’s not fool ourselves, however. There is no free lunch. The true cost of losing federal support for the poor will increasingly land at our feet in our local community. Unsolved problems don’t just magically disappear, they simply shift to others to solve.