What's in Trump's big budget bill? From cuts to taxes and Medicaid, here's what to know

Globe and Mail

27-05-2025

If Donald Trump gets his way, a long list of his policy priorities will all be enacted by a single law: The One Big Beautiful Bill Act, which would cut a swath of taxes, lengthen the wall on the border with Mexico and fund mass deportations.
The U.S. President's plans would be paid for in part by cuts to spending on health care, food stamps, student loans and fighting climate change.
Despite its spending cuts, the bill would cost up to US$3.2-trillion, according to modelling by the University of Pennsylvania's Wharton School, driving up the country's debt. The tax cuts, meanwhile, would mostly benefit the wealthiest Americans while the poorest would be made poorer, according to Wharton's estimates.
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These twin realities are making the bill controversial in Congress, raising the hackles of Republican deficit hawks while rallying the opposition Democrats against the cuts.
The bill passed the House of Representatives last week by a single vote and now must get through the Senate. There, Mr. Trump will have to find a way to hold together as much of his caucus as possible to enact the centrepiece of his domestic policy agenda.
Here is what's in the proposed law and what happens next.
The bill's central provision is to make permanent a suite of temporary tax measures passed in Mr. Trump's first term, which otherwise would expire this year. These include cuts to most income tax rates, a larger standard deduction, higher gift and estate tax exemptions, and a cut to taxes on pass-through entities such as limited liability companies.
The legislation would also increase the cap on the amount of state and local taxes – or SALT – that people can deduct from their federal taxes to US$40,000 from US$10,000. It would eliminate a US$200 tax on gun silencers in place since 1934. And it would decrease royalty rates paid by oil, gas and coal companies.
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The child tax credit, meanwhile, would temporarily rise to US$2,500 from US$2,000, and most tipped workers would receive a new tax deduction. Both measures would expire in 2028, Mr. Trump's last year in office.
Unlike most of the rest of the bill, these two last measures have broad bipartisan support. A previous, Democratic-controlled Congress tried unsuccessfully to increase the child tax credit even further than the Big, Beautiful Bill would. The U.S. Senate this month, meanwhile, unanimously passed a stand-alone bill to take the tax off most income earned via tips.
Mr. Trump's signature policy of cracking down on asylum seekers and undocumented immigrants would receive a huge cash injection under the bill. It includes US$46.5-billion to restart construction of the wall on the Mexican border, and more than US$6-billion to hire and retain more border guards. The aim is to build enough capacity for the U.S. to deport one million people annually.
Other new spending includes US$150-billion in additional money for the defence department, including US$25-billion to start building the Golden Dome missile defence shield, which Canada is in talks to join.
To partly offset the cost of the tax cuts, Congressional Republicans are targeting Medicaid – a program that provides government-funded health care to the poorest Americans – for a nearly US$700-billion cut by adding a requirement that recipients prove they are working. They are also not renewing some tax credits for people buying private insurance through the Obamacare system.
The new Medicaid rules would take away health coverage from 8.6 million people, according to an estimate by the Congressional Budget Office.
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Another provision would take US$267-billion out of the Supplemental Nutrition Assistance Program – or SNAP – popularly referred to as food stamps, which helps low-income Americans buy groceries.
The bill would also put new restrictions on how much money people can take out in student loans and make repaying them more expensive.
Lastly, the bill would eliminate or curb tax incentives for fighting climate change originally enacted by former president Joe Biden, including tax credits for clean electricity generation facilities, installing solar panels and buying electric vehicles. Other provisions would make it easier to drill for oil and gas on public land.
Former Democratic House speaker Nancy Pelosi has branded the legislation 'Robin Hood in reverse' for cutting programs that help low-income Americans and delivering most of its benefits to people at the top of the ladder.
The Wharton model estimates that 70 per cent of the benefits from the tax cuts will go to the top 10 per cent of income earners, while those in the bottom quintile would be poorer if the bill is passed than if it were not.
Some moderate Republican senators may be willing to team up with the Democrats to prevent cuts to social spending. Alaska's Lisa Murkowski and Maine's Susan Collins, for instance, both helped tank Mr. Trump's 2017 effort to repeal Obamacare over that bill's proposal to slash Medicaid.
On the other side of the ledger, fiscal conservatives are demanding more cuts to spending. Kentucky Republican Rand Paul described the proposed reductions as 'wimpy and anemic' on Fox News. Wisconsin's Ron Johnson, meanwhile, told CNN that senators would hold up the bill 'until the President gets serious about spending reduction and reducing the deficit.' Moody's downgraded the U.S.'s credit rating this month.
Another intraparty flashpoint is the state and local tax deduction. Republicans in higher-tax Democratic-run states support it because it helps their constituents, while red-state Republicans see it as a subsidy for tax policies they oppose.
The Republicans' 53-seat caucus means they can only afford to lose a handful of votes. Once they do pass something, they will then have to negotiate with the House over any changes they have made to it.