CBO: Trump’s tax bill will increase US debts by $3.4 trillion
The recently enacted tax and spending law by President Donald Trump is projected to increase US deficits by $3.4 trillion over the next decade, while also resulting in millions lacking health care coverage, as indicated by a new estimate from the nonpartisan Congressional Budget Office. The recent CBO score for the legislation, published on Monday, indicates a reduction of $4.5 trillion in revenues and a $1.1 trillion decrease in spending projected through 2034, when compared to the current-law baseline. The recent analysis fails to account for dynamic effects, including the potential influence on growth or interest rates over time that the measures outlined in the legislation may exert.
On July 4, following extensive negotiations with congressional Republicans, Trump enacted the “One Big Beautiful Bill.” The legislation encapsulates a significant portion of Trump’s economic agenda by permanently extending the income-tax reductions implemented in 2017 and providing certain benefits for businesses. It also raises the limit on federal deductions for state and local taxes and temporarily removes taxes on tips and overtime, alongside various other measures. The enactment of the legislation has elicited caution from various economists and investors regarding the potential expansion of the United States’ budget deficit, which is already substantial by historical measures, and may lead to increased borrowing costs and inflationary pressures. The Trump administration highlights the unprecedented revenue generated from the tariffs imposed on the majority of US imports this year, asserting that this influx will assist in bridging the fiscal shortfall.
A series of expenditure reductions were incorporated into the tax legislation as a strategy to diminish deficits and balance the associated costs, notably impacting Medicaid, which offers health insurance to low-income individuals. New work requirements for Medicaid recipients under the age of 65 are scheduled to commence by the conclusion of 2026. The legislation further constrains the capacity of states to impose taxes on health care providers as a means to finance the program. According to the analysis by the CBO, provisions in the law are projected to lead to a loss of health insurance for 10 million Americans by 2034. The prospective loss of health insurance coverage coincides with escalating prices stemming from tariffs, which are poised to exacerbate economic difficulties for low-income families. June inflation data indicated potential effects of the levies on costs, with expectations among economists that prices will persist in their upward trajectory throughout the summer. This would have a disproportionate effect on low-income Americans, who typically allocate a greater portion of their income to essential expenditures, including food.
At the behest of Senate Republicans, the legislation was additionally evaluated in relation to an existing policy baseline. Based on that analysis, it would lead to a reduction in deficits amounting to $366 billion over a ten-year horizon, while revenues would decline by $849 billion during the same timeframe — approximately one-fifth of the decrease noted in traditional assessments. Legislators employed this accounting strategy to assert that the permanent extension of the 2017 income-tax reductions incurs no cost.
