The Big Ugly Tax Scam Bill Jun. 12, 2025
|
| Lowest | 2nd | 3rd | 4th | 5th | 6th | 7th | 8th | 9th | Highest | All | |
| $ billions -Total Change | -30.9 | -17.9 | -10.4 | -4.7 | +2.4 | +9.7 | +16.9 | +26.1 | +40.8 | +136.5 | +168.4 |
| % share of Total Change | -18.3 | -10.6 | -6.2 | -2.8 | +1.4 | +5.7 | +10.0 | +15.5 | +24.2 | +81.1 | 100.0 |
| $ Annual average Change per Household |
-2,085 | -1,228 | -702 | -311 | +159 | +651 | +1,179 | +1,857 | +2,943 | +9,500 | +1,154 |
After 10 years
81% goes to the Richest 10% -
while the Bottom 40% will pay MORE !
| Income Level | Change in Resources per year | % of Projected Income per year | Primary Cause |
|---|---|---|---|
| Lowest (1st decile) | –$1,600 | –3.9% | Reduction in in-kind transfers (Medicaid, SNAP) |
| Middle (5th decile) | +$500 | +0.5% | General increase |
| Middle (6th decile) | +$1,000 | +0.8% | General increase |
| Highest (10th decile) | +$12,000 | +2.3% | Reduction in taxes |
 |
LOWEST INCOME: Resources for households in the
lowest decile of the income distribution would
decrease by about
$1,600 per year (in 2025 dollars) compared with their projected income
in CBO's baseline projections (see Figure 1).5 |
|
MIDDLE INCOME: Households in the 5th and 6th deciles (that is, in the middle of the income distribution) would see their resources increase by $500 (or 0.5 percent of projected income) and $1,000 (or 0.8 percent of projected income), respectively. |
|
HIGHEST INCOME: Resources would increase,
on average, over the projection period by about
$12,000 for households in the highest
decile, amounting to 2.3 percent of their projected income. |
CBO
estimates that, on average, household resources would increase over the
2026–2034 period, mainly because of reductions in how much households owed in
federal taxes.
The effects on household resources would vary by channel and across the income
distribution.
CBO and the staff of the Joint Committee on Taxation (JCT) recently estimated the budgetary and distributional effects of H.R.1 as passed on May 22, 2025.1
On the
basis of those estimates, CBO allocated the effects on revenues and spending to
households.
The agency also allocated to households the effects of states' estimated
responses to changes to health programs — primarily
Medicaid — and the Supplemental Nutrition
Assistance Program (SNAP).2
CBO
estimates that if the legislation was enacted, U.S. households, on average,
would see an increase in the resources available to them over the 2026–2034
period.
The changes would not be evenly distributed among households.
The agency estimates that in general, resources would
decrease for households toward the bottom of the income distribution,
whereas resources would increase for households in the middle and top
of the income distribution.
This
analysis includes most, but not all, provisions of H.R.1.
The distributional analysis of changes to taxes and tax-related outlays is based
on analysis done by JCT.
Therefore, the analysis in this letter excludes any tax provisions not allocated
in JCT's distributional analysis of H.R.1.3
Also, CBO's analysis does not reflect the effects of the additional debt-service costs or the macroeconomic effects of the bill.
CBO estimates that the budgetary effects of the legislation would affect household resources through 4 channels over the 2026–2034 period:
Federal taxes and cash transfers would
increase household resources by $3.1 trillion,
on net (in 2025 dollars).
In particular, changes to federal tax provisions, especially
extensions of provisions of the
2017 tax act and reductions in subsidies for
health insurance under the
Affordable Care Act, would affect household
resources.
Changes to student loan programs would
also affect those resources.
Federal and state in-kind benefits would
decrease household resources by $1.0 trillion,
primarily because federal spending on benefits provided through
Medicaid and SNAP
would be lower.
Changes to program benefits that states made in response to changes in federal
policy would also reduce household resources.
States' fiscal responses would
increase household resources by $10 billion,
on net.
Those responses consist of the tax and spending changes implemented by states
in response to changes to their fiscal position.
In CBO's assessment, Medicaid eligibility
changes under the legislation would reduce states' spending on
Medicaid benefits.4
Those decreases would be largely offset by the new matching requirements for
SNAP, which would increase state spending.
In CBO's analysis, states, in the aggregate, would use the resulting overall
reduction in benefit spending to increase spending in other areas and to
reduce taxes, both of which would increase household resources.
Other spending and revenues would
increase household resources by $129 billion,
on net.
The spending and revenues in this category were allocated as if they were
public goods.
This category includes federal spending on defense,
border security, and
infrastructure.
Those outlays are partially offset by reductions in federal pensions, receipts from spectrum
auctions, and changes in receipts and outlays associated with changes to
emissions regulations.
For this analysis, changes in taxes were based on JCT's
estimates.
Changes to Medicaid were allocated in part
to program participants because they would be affected by program changes, such
as those to eligibility rules.6
Changes were also partially allocated to healthcare
providers and insurers, whose
revenue would be reduced.7
Changes to SNAP were allocated to program
participants.
Changes to student loan programs were
allocated to borrowers on the basis of their current income, although student
loan policy is typically made with a view toward students' income over their
lifetime.8
The
distributional estimates also reflect the effects of states' responses to
federal policy.
CBO accounted for state spending on Medicaid
and SNAP stemming from H.R.1 as well as for
changes in taxes and other spending implemented by states in response to the
effects of H.R.1 on their budgets.9
All other changes were allocated as if they were public goods — that is, they were allocated equally in proportion to each household's share of the population and its share of total income.10
The
Congressional Budget Act of 1974, as amended, stipulates that revenue estimates
provided by JCT are the official estimates for all tax legislation considered by
the Congress.
Therefore, CBO incorporates those estimates into its cost estimates of the
effects of legislation.
JCT has also evaluated the distributional effects of the estimated changes in
taxes and tax-related outlays.
CBO incorporated JCT's estimates in the results reported above.
1Congressional Budget Office,
Estimated Budgetary Effects of H.R.
1, the One Big Beautiful Bill Act (June 4, 2025), www.cbo.gov/publication/61461;
and Joint Committee on Taxation, Estimated
Revenue Effects of Tax Provisions to Provide For Reconciliation of the
Fiscal Year 2025 Budget as Passed by the House of Representatives on May 22,
2025, JCX-26-25R (June 2025), www.jct.gov/publications/2025/jcx-26-25r/.
For more information about the budget reconciliation process and the cost
estimates of the legislation, see Congressional Budget Office,
“Reconciliation” (accessed June 10, 2025), www.cbo.gov/topics/budget/reconciliation.
2For more information about
how CBO incorporates state responses into its estimates of certain changes
to Medicaid, see Congressional Budget Office, letter to the Honorable Ron
Wyden and the Honorable Frank Pallone, Jr.
providing estimates for Medicaid policy options and state responses (May 7,
2025), www.cbo.gov/publication/61377.
3Joint Committee on Taxation, Distribution
of the Estimated Revenue Effects of the Tax Provisions to Provide for
Reconciliation of the Fiscal Year 2025 Budget as Passed by the House of
Representatives on May 22, 2025, JCX-27-25 (June 2025), www.jct.gov/publications/2025/jcx-27-25.
The largest provisions excluded from JCT's analysis are the permanent
extension of increased estate and gift tax exemptions (a revenue decrease of
about $200 billion over the 2026–2034 period); the termination of clean
energy credits, including credits for commercial and consumer clean
vehicles, residential clean energy, and energy-efficient home improvements
(a revenue increase of about $175 billion); and the elimination of taxes on
car loan interest (a revenue decrease of about $50 billion).
4Rather than modeling separate responses for each state, CBO estimated states' fiscal responses in the aggregate, accounting for a range of possible outcomes.
5The deciles are constructed
by ranking households on the basis of income after transfers and taxes,
adjusted for household size.
For details about how CBO produces those deciles, as well as the data the
agency uses and how it produces an income distribution for future years, see
Bilal Habib and Rebecca Heller, Current Work
on the Distributional Effects of Policy Changes, Working Paper 2022-09
(Congressional Budget Office, December 2022), www.cbo.gov/publication/58508.
Amounts are expressed in 2025 dollars, adjusted using the price index for
personal consumption expenditures.
6Medicaid eligibility changes would affect low-income households in two main ways: through their effects on able-bodied adults without dependents who would be required to work and through their effects on certain groups of immigrants.
7CBO's allocation of changes
in Medicaid spending corresponds to the effects of different provisions on
quantities of care and reimbursements to providers, accounting for changes
in uncompensated care.
Reductions in beneficiaries' resources account for 44 percent of the
changes, CBO estimates.
The remaining 56 percent of the changes are accounted for by reductions in
the resources of people owning and working for health care providers and
insurers.
(About 70 percent of those reductions were allocated to labor income and 30
percent to capital income on the basis of the income shares in those
sectors.) For more information, see Pengju Zhang and Ling Zhu, “Does the ACA
Medicaid Expansion Affect Hospitals' Financial Performance?” Public Finance
Review, vol.
49, no.
6 (November 2021), pp.
779–814, https://doi.org/10.1177/10911421211064676;
Amy Finkelstein, Nathaniel Hendren, and Erzo F.
P.
Luttmer, “The Value of Medicaid: Interpreting Results From the Oregon Health
Insurance Experiment,” Journal of
Political Economy, vol.
127, no.
6 (December 2019), pp.
2836–2874, https://doi.org/10.1086/702238;
and Craig Garthwaite, Tal Gross, and Matthew J.
Notowidigdo, “Hospitals as Insurers of Last Resort,” American
Economic Journal: Applied Economics, vol.
10, no.
1 (January 2018), pp.
1–39, https://dx.doi.org/10.1257/app.20150581.
8As required by the Federal
Credit Reform Act of 1990, the budgetary effects of the federal student loan
program are estimated on a net-present-value basis.
(A present value is a single number that expresses a flow of current and
future payments or receipts in terms of an equivalent lump sum paid or
received at a specific time.) By contrast, the distributional effects of
changes to that program are computed on a cash-flow basis — that is, the
resources available to households in a given year that are attributable to
the policy change.
Because of that discrepancy, the total resource cost allocated to households
does not match the budgetary effect reported by CBO.
9For more details about CBO's
estimates of the budgetary effects of changes to the Supplemental Nutrition
Assistance Program, see Congressional Budget Office, letter to the Honorable
Amy Klobuchar and the Honorable Angie Craig providing information on the
potential effects on the Supplemental Nutrition Assistance Program of
Reconciliation Recommendations Pursuant to H.
Con.
Res.
14, as Ordered Reported by the House Committee on Agriculture on May 12,
2025, (May 22, 2025), www.cbo.gov/publication/61426.
10For a discussion of those methods, see Congressional Budget Office, The Distribution of Federal Spending and Taxes in 2006 (November 2013), www.cbo.gov/publication/44698.
END FOOTNOTES
|
