Seven ways the 'One Big Beautiful Bill' could affect New Mexico

Yahoo

2 days ago

Jun. 2—A massive federal budget bill is winding its way through the Senate after passing the House in May. The controversial tax package would deliver on several of President Donald Trump's campaign promises and could mean big changes for New Mexicans.
Democrats have criticized the bill for its cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP) and tax breaks for high-income earners, while some Republicans say the funding cuts don't go far enough to trim down the bloated federal budget and the ballooning deficit — the tax cuts alone would be paid for, in part, by increasing the country's deficit by $3.8 trillion over 10 years.
On average, U.S. households would see an increase in resources from the government from 2026 to 2034, if the House budget bill makes it into law, according to a Congressional Budget Office (CBO) analysis. But the bottom 10% of income earners would see a loss in household resources, primarily because of changes to Medicaid and SNAP. Meanwhile those in the top 10% would see an increase in household resources, because the taxes they owe would be reduced. Though House Speaker Mike Johnson (R-LA) accused the CBO of shoddy math, saying the agency was more than $1 trillion off.
Here's a look at how the "One Big Beautiful Bill Act," could affect New Mexico.
1. Medicaid
The "One Big Beautiful Bill Act" would cut approximately $700 billion from Medicaid spending over the next 10 years and introduce new work requirements and co-pays. With a high poverty level, New Mexico has the highest rate of Medicaid enrollment. More than 90,000 New Mexico residents could lose health care coverage because of the changes.
This provision faces opposition from several GOP senators; but conversely those in the House who pushed for more Medicaid cuts would turn against the bill if these cuts are watered down or eliminated. Medicaid represents the toughest of tight rope acts in this bill to get through both chambers to final passage.
2. Potential hospital closures
The Medicaid funding cuts could also put more rural hospitals at risk of closing, Democrats have argued, because Medicaid and Medicare are important revenue sources for rural hospitals.
Three of 27 inpatient rural hospitals in New Mexico are already at immediate risk of closing, according to a report from the Center for Healthcare Quality & Payment Reform. Overall, seven of the state's rural hospitals are at risk of closing.
In part, that's because private insurance plans do not adequately compensate some rural hospitals for the services they provide, according to the report. Rural hospitals often already lose money on uninsured and Medicaid patients, but the hospitals not at risk of closure are often making enough profit on patient services from private health plans to balance those losses.
3. Food aid
More than 460,000 New Mexicans receive SNAP benefits.
The House bill would cut $267 billion from the Supplemental Nutrition Assistance Program, or SNAP, spending over the next 10 years, in part by introducing a cost share with states. It would also introduce new work requirements to the program. The proposed changes could cost New Mexico $300 million.
4. Extending tax cuts
The budget bill would extend 2017 tax cuts passed during Trump's first administration. That would prevent tax increases for 62% of taxpayers, which would happen if the tax cuts expire, according to the Tax Foundation.
This would extend, or make permanent, tax cuts for most New Mexicans. Republicans have highlighted the benefits to working families, like making the child tax credit permanent. But Democrats have criticized some measures that would benefit the very wealthy, like permanently increasing the estate and gift tax exemption threshold to $15 million.
5. No tax on tips
The House-passed budget bill includes no taxes on tips and overtime through 2028, fulfilling one of Trump's campaign promises. The idea of no tax on tips was appealing enough to voters that even former Vice-President Kamala Harris added it to her campaign platform.
The Economic Policy Institute has criticized the idea, arguing that it helps relatively few workers, undermines pay increases for non-tipped workers and could expand the use of tipped workers, a system "rife with discrimination and worker abuse."
New Mexico's restaurant industry, where tipped employees are often most visible, employs over 90,000 people in the state and generates more than $5.3 billion in annual sales, according to the New Mexico Restaurant Association.
6. Student loans and Pell Grants
The budget bill would eliminate some repayment options for future federal student loan borrowers, and introduce a new, income-based repayment plan. Borrowers with loans disbursed before July 2026 could keep their current repayment plan. It would eliminate new borrowers' ability to pause loan payments during economic hardship.
The bill also increases Pell Grant credit requirements and changes eligibility requirements. In the 2023-2024 academic year, there were 37,708 federal Pell Grant awards in New Mexico, according to the National Association of Independent Colleges and Universities.
7. Preventing AI regulation
The House bill includes a decade-long ban on state regulations of artificial intelligence. Adopting a light regulatory style for the AI industry will allow the AI supply chain to rapidly grow in the U.S., Sen. Ted Cruz, R-Texas, said during a Senate Commerce Committee hearing.
"The country that leads in AI will shape the 21st century global order," Cruz said.
New Mexico Attorney General Raúl Torrez signed onto a letter opposing the measure, along with attorneys general from 39 states and territories. A bill to penalize using AI-generated content for harassment or defamation was introduced in the state Legislature earlier this year.
"Though it didn't pass, strong state-level protections are still urgently needed, and states must have the flexibility to regulate this emerging technology if Congress refuses to act," Torrez said in a statement.
This provision faces an uphill battle in the Senate where even No. 2 Senate Republican John Cornyn, R-Texas, has said it could fail a Byrd Rule challenge, which says that every line in the budget must be related to the budget and not policy.