President Donald Trump’s signature tax cut and spending package, known as the “One Big Beautiful Bill,” was passed by the US House of Representatives on July 3.
The bill combines tax increases, spending increases on defense and border security, and social safety net reductions.
The bill “hurts regular Americans and rewards billionaires with massive tax breaks,” according to Democratic Minority Leader Hakeem Jeffries.
Elon Musk, a former ally of Trump, criticized the bill in a statement, saying it would “bloat” spending and the nation’s already unmatched debt.
On Friday, July 4, the US’s Independence Day, at 4 p.m. et, Trump is anticipated to sign the bill into law.
What will happen next, and who will be affected by the bill:
How have taxes decreased?
The bill’s main objective was to increase Trump’s first-term tax cuts.
The Tax Cuts and Jobs Act, which lower taxes and increased the standard deduction for all taxpayers, was signed by Trump in 2017, primarily to benefit those with higher incomes.
Households earning $460, 000 or more made up more than a third of the total cuts.
By 2025, the top 1% (roughly 2.4 million people) will have received an average tax cut of $ 61,090, which is higher than any other income group. In contrast, there were savings of between $ 380 and $ 1,800 for the middle 60 percent of earners (78 million).
The new law made these tax breaks permanent, but they were scheduled to expire this year. Additionally, Trump added some additional spending cuts as promised during his most recent campaign.
For instance, the State and Local Taxes Deduction has been updated in the US tax code.
Taxpayers can deduct some local taxes, such as property taxes, from their federal tax returns in this manner.
People can only deduct up to $10,000 of these taxes at the moment. This cap would increase from $10,000 to $40,000 for five years under the new bill.
Taxpayers will be able to deduct tips and overtime income up until 2028, as well as interest on loans to buy US-made cars from now until 2028.
The estate tax exemption will increase to $30 million for married couples and $15 million for individuals elsewhere.
The legislation also includes about $4.5 trillion in tax cuts.
Social welfare cuts: how much do they cost?
Republicans intend to reduce funding for low-income families’ food assistance programs, as well as Medicaid and other programs to help offset the cost of the tax cuts.
Their stated objectives included limiting access to immigrants and focusing these programs on specific groups, primarily pregnant women, people with disabilities, and children.
More than 71 million people are currently covered by the government’s Medicaid program.
The bill would leave an additional 17 million Americans without health insurance in the coming ten years, according to the Congressional Budget Office (CBO).
The Supplemental Nutrition Assistance Program (SNAP) assists poor people in purchasing groceries while Medicaid assists Americans in poor health.
Benefits are currently provided by SNAP, or food stamps, to about 40 million Americans.
According to the CBO, 4.7 million SNAP participants will lose out over the course of the 2025-2034 program reductions.
Without any sunset clauses attached, changes to Medicaid and SNAP may become permanent provisions.
The new bill, the largest spending reductions to the US safety net in modern history, was highlighted in a recent White House memo that referenced more than $1 trillion in welfare cuts.
Will there be additional funding for national security?
For Trump’s border and national security plans, the bill sets aside about $ 350 billion, spread out over a number of years. Among these are:
- $46 billion is being spent on the border wall between Mexico and the US.
- $45 billion to provide 100 000 beds for migrant detention facilities
- In order to carry out Trump’s largest mass deportation effort in US history, he will need to employ an additional 10,000 Immigration and Customs Enforcement (ICE) agents by 2029.
Will clean energy suffer as a result?
Republicans have withdrawn tax breaks from coal and oil companies in favor of clean energy projects supported by renewable energy sources like solar and wind.
The landmark Inflation Reduction Act, signed by former president Joe Biden, aimed to combat climate change and lower healthcare costs.
Instead of expiring at the end of 2032, the current law allows for people to purchase new or used electric vehicles on September 30 this year.
What impact will the US debt profile have?
The proposed legislation would increase the debt ceiling from the current $ 36. 2 trillion (which accounts for 122 percent of GDP or GDP) to the $ 4 trillion that was proposed in the House’s version in May.
Washington is unable to borrow more money than the nation’s stated debt cap. However, Congress has 78 times raised, suspended, or changed the debt ceiling, putting more pressure on the US’s long-term fiscal stability.
During the COVID-19 pandemic, Trump oversaw an estimated $ 8 trillion increase in the federal debt in his first term.
In the wake of the COVID-19 pandemic, the debt as a share of GDP, or the aftermath of the 2008 financial crisis, was already higher than it was last year. In May, Moody’s downgrading of the US credit score was a result of inattention.
The White House asserts that in part by promoting further growth, the new tax bill will reduce projected deficits by more than $1.4 trillion over the next ten years. However, that has been vehemently refuted by economists on both sides.
By 2034, interest payments on the nation’s debt will exceed the legislation’s target of $ 2 trillion, which would overshadow spending on other goods and services, according to the non-partisan Committee for a Responsible Federal Budget.
How was the bill voted in the House of Representatives?
On Thursday, the US Congress’ lower house approved the bill by a margin of 218 to 214.
The bill was opposed by all 212 Democratic House members. Representatives from the Republican majority, Thomas Massie of Kentucky and Brian Fitzpatrick of Pennsylvania, joined them.
The bill was overwhelmingly passed by the Senate on July 1 with the support of Vice President JD Vance, who had cast the decisive vote.
Who will gain the most from this?
The budget lab at Yale University found that wealthy taxpayers are more likely to benefit from this bill than those with lower incomes.
Source: Aljazeera
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