Trump Tax Bill to Increase National Debt by $3 Trillion, Hurting Younger Americans

US President Donald Trump’s tax-cut bill, which has passed through the House and is awaiting Senate approval, is already impacting young Americans negatively. While the legislation offers some benefits to parents, students, and hourly workers, it also includes significant cuts and a $3 trillion increase to the national debt. Analysts warn that this will deplete future earnings, elevate interest rates, and impose higher mortgage payments and taxes on younger generations.

The plan is projected to expand the $36.2 trillion federal debt, compelling future governments to allocate more funds to debt payments rather than programs that assist younger individuals. Kent Smetters, who leads the Penn Wharton Budget Model, stated, “Future generations are kind of left holding the bag.” His model indicates that a 40-year-old with an average income would lose $7,500 over their lifetime if the plan is enacted, while a 70-year-old in the same income bracket would gain $17,500. This disparity highlights how older Americans benefit while younger ones are disadvantaged.

Several factors contribute to this outcome. Younger workers typically earn less, so they gain less from the income tax reductions. Additionally, the bill reduces funding for student aid and Medicaid, programs more commonly used by younger people. Medicaid, for instance, covers 40% of births in US hospitals, making cuts to this program particularly impactful for young parents.

Jessica Riedl from the Manhattan Institute noted, “In the short term the benefits are certainly tilted towards higher earners, which is often a good proxy for age.” The most significant issue, however, is the debt. Adding trillions to the national debt is likely to increase interest rates, making it more challenging for the next generation to purchase homes or secure loans. John Ricco from the Yale Budget Lab found that in 2055, when today’s babies turn 30, the average mortgage could cost $4,000 more annually due to this bill.

Republicans argue that these measures are part of a long-term solution. They claim that cuts to Medicaid will stabilize the program and that new tax breaks for overtime pay and tipped income will benefit younger workers. They also assert that the bill stimulates business and aids those entering the workforce. However, these benefits are modest and short-lived compared to the losses incurred.

The bill includes some family-oriented benefits, such as $1,000 savings accounts for newborns and an expanded child tax credit, though the final versions in the House and Senate differ. Steve Scalise, the second-ranking Republican in the House, stated that the bill would increase the take-home pay for a median-income household with two children by $4,000 to $5,000. However, these figures do not account for rising costs in healthcare, groceries, and student loans resulting from other cuts in the bill.

The Congressional Budget Office and other analysts confirmed that the costs would outweigh any benefits for lower- and middle-income households. Even with the expanded child tax credit, it does not fully apply to low-income families, meaning those who need the most help do not receive the full benefit.

Older Americans also receive targeted tax breaks, including a reduction for those over 65, one of Trump’s campaign promises. However, Brendan Duke from the Center on Budget and Policy Priorities noted, “The tax cuts basically do nothing for the lower-income half of seniors.” Most do not earn enough to qualify. Wealthier seniors, on the other hand, do benefit. Additionally, those over 65 retain their Medicare and Social Security benefits untouched.

These two programs are projected to increase in cost as the population ages. While Medicaid, used more by the young and poor, faces cuts, Medicare and Social Security remain protected. Both Trump and his Democratic opponents have pledged not to alter these programs. However, both are projected to face funding shortages by 2033, with neither side proposing a viable solution. This leaves the problem and the associated costs for future generations.

This issue is not new. Riedl pointed out, “I think ultimately Republican and Democratic lawmakers have been engaged in intergenerational theft for a long time.” However, this bill, under Trump, accelerates this trend. The wealthiest and oldest receive the benefits, while the youngest are burdened with the debt.