Trump's Tax Bill to Cut $3.75T in Taxes, Increase Deficit by $2.4T

The United States Congress Budget Office (CBO) has released an analysis indicating that the tax reform bill, championed by President Donald Trump, will result in a reduction of 3.75 trillion dollars in taxes over the next decade. However, this will concurrently increase the federal deficit by 2.4 trillion dollars. The bill, known as the "One Big Beautiful Bill Act," was narrowly passed by the House of Representatives on May 22. This legislation is a cornerstone of Trump's second-term agenda, focusing on tax cuts, spending reductions, increased defense spending, and additional funding to combat illegal immigration.

Trump has enthusiastically described the bill as "big and beautiful," hence its name. The bill is currently under review by the Senate and faces opposition from some conservative Republicans. Trump aims to sign the bill into law before July 4. The legislation extends personal income tax cuts enacted in 2017, which are set to expire at the end of this year, and introduces new tax cuts, including exemptions for tips. Additionally, it allocates 35 billion dollars for border security, deportation, and national security measures.

Democrats have strongly opposed the bill, arguing that while it provides significant tax cuts for the wealthy, it also reduces numerous social welfare programs. According to the CBO, by 2034, the bill will result in an additional 10.9 million people without health insurance, including 1.4 million undocumented individuals who benefit from state-funded programs. The bill is expected to reduce federal spending by nearly 1.3 trillion dollars over the next decade.

To offset the revenue loss from tax cuts, Republicans have proposed reducing certain federal expenditures. This includes phasing out green energy tax credits established during the Biden administration and raising the eligibility thresholds for Medicaid and SNAP benefits to decrease spending on these programs. The bill also raises the national debt ceiling by 4 trillion dollars, currently set at 36 trillion dollars, to allow for additional borrowing. The Treasury Department anticipates that the debt ceiling will need to be raised this summer to cover accumulated national debt.

The CBO, established 50 years ago, serves as a check on the White House Office of Management and Budget (OMB) to strengthen Congress's constitutional budgetary authority. The analysis underscores the significant fiscal implications of the proposed legislation, highlighting the trade-offs between tax cuts and increased spending versus deficit reduction and social welfare programs. The bill's passage and implementation will have far-reaching effects on the U.S. economy and budget, shaping the financial landscape for years to come.