Trump’s One Big Beautiful Bill: Reform or Regression?

The bonhomie between the richest man in the world and the most powerful man in the world, i.e., Elon Musk and Donald Trump, collapsed following a proposed tax cut bill dubbed the ‘One Big Beautiful Bill Act.’ The tax bill is nearly 1,000 pages long and has been passed by the House. It now awaits its fate in the Senate, while Musk and Trump engage in a heated exchange of words on social media.

The bill proposes an extension of the 2017 tax cuts and makes permanent the provisions of business tax from the Tax Cuts and Jobs Act of 2017 (TCJA), which is estimated to cause a revenue loss of approximately $3.7 trillion over the next decade. It realizes many of the promises Trump made during his campaign, including tax breaks for workers, and eliminates federal taxes on overtime wages and cash tips for workers earning up to $160,000. Although these exemptions are meant as a temporary push, they would expire after 2028.

For Social Security Number holders, the Child Tax Credit is increased to $2,500 per child until 2028. Further, citizens over the age of 65 will get an extra $4,000 standard deduction to save their social security from income tax. The bill also introduced ‘Trump Savings Accounts’, a feature meant for family savings that provides a $1,000 government deposit against a $5,000 savings account created for newborns. The deduction cap has been increased for the state and local tax (SALT) from $10,000 to $40,000 for couples that earn under $500,000 per year.

The bill has increased the federal debt limit by $4 trillion, a step to ensure that the current programs and spending continue at the same pace without initiating a new one. It also raises the budget for defense and homeland security, especially for realizing Trump’s plan of creating a border wall. Nearly $49.7 billion has been allocated. Moreover, an additional $12 billion is proposed to help states build their border walls, and another $14.6 billion is allocated for US Customs and Border Protection. The Pentagon and Armed Forces will receive an additional funding of $144 billion over the next decade to spend on crucial areas like cybersecurity, shipbuilding, and military readiness. All these numbers reflect Trump’s agenda of strengthening the two important components of great power—military and economy.

However, as was speculated by critics earlier, Trump has proposed cuts in Medicaid. To qualify for health coverage, the bill has introduced stringent requirements like volunteering or training services or 80 hours per month of work by non-disabled and childless adults in the age group of 19-64. This rule will come into effect in 2026, and there will be a review of eligibility every 6 months, as opposed to the earlier 12-month criterion. The administration has justified these actions, along with stricter income verification mechanisms, as a measure to ‘reduce waste, fraud, and abuse’ of taxes. Nonetheless, this would rupture the already suffering healthcare structure of the United States, with an estimated 10.9 million Americans on the verge of losing their medical aid over the next ten years.

In addition, the Supplemental Nutrition Assistance Program (SNAP), which provides food benefits to families from low-income groups, faces new challenges. The age limit of people required to work, with no disability or dependents, has been increased from 54 to 64. States will now have to shoulder the SNAP benefits costs by contributing a minimum of 5% in order to de-burden the federal government. Analysts believe that this would lead nearly 4 million people out of the benefits bracket and increase social insecurities over time.

The bill also touches upon higher education, an area that Trump has been pushing for in his second term with the removal of Diversity, Equity, and Inclusion (DEI) clauses, fund cuts for universities, dismissal of foreign students, and curbing freedom to protest on university campuses. The bill decreases the student loan portfolio and eliminates the Saving on a Valuable Education (SAVE) plan introduced by Biden to help students taking education loans manage their debts. Furthermore, the criterion for Pell Grants, which are federal financial aid for low-income undergraduate students, has been tightened. Now, students with 30 credits per year and those getting a minimum of 15 credits will get maximum grants. The bill also reflects Trump’s anti-climate change approach as he terminates several green tax credits and has repealed 7,500 tax credits on electric vehicles.

For the first time, the bill has included a fee on immigration processes. Asylum seekers are required to pay a fee of $1,000; immigrants authorized to work have to pay $550 every six months, and undocumented minors sponsors must pay $3,500 along with fees for parolees and people applying for temporary protected status. These fees are estimated to generate a revenue of one billion every year. The bill also curtails non-citizens from seeking Medicaid and puts an end to the open enrollment policy of Obamacare. This in turn will impact the subsidies that were allocated for medical care and put the immigrants at a heightened health risk.

Fiscal Impact of Key Provisions – Financial Year 2025- Financial Year 2034

The bill would only reap short-term benefits as a byproduct of tax cuts but will affect the growth rate in the long term. Non-partisan Congressional Budget Office (CBO) findings claim that the tax cuts introduced by the bill would cost $3.7 trillion in lost revenue against $1.2 trillion that would be generated in new savings. Hence, the deficit would increase by $2.4 trillion over the next ten years, and with interest, the American Action Forum (AAF) estimates this deficit to be approximately $3 trillion. This implies that the debt would shoot up to 124% of GDP by 2034. On the contrary, the White House claims that the deficit would decrease by $1.6 trillion, a claim that no economist is convinced of.

Moreover, to finance massive tax cuts, the government would have to rely on borrowings, which will eventually lead to slow growth in the long run. The GDP will be higher in the initial years, but by 2054 it will slow down to 1.8% below baseline. Therefore, the debt-financed tax cuts are not a long-term benefit-reaping policy.

While the economists are not welcoming of the changes, the political side has a completely different approach towards it. Speaker Johnson called it a ‘historic’ and ‘life-changing’ bill, while President Trump claims that it is “the most significant piece of legislation…ever.” Despite the celebratory tone of Republicans in the House of Representatives, the Senate has its reservations. Leaders like John Thune have raised concerns over the provisions concerning changes in SALT. [1]

The most unanticipated criticism of the bill came from Elon Musk, who has been a devout supporter of President Trump. He called the bill a “massive, outrageous, pork-filled Congressional spending bill’ that would increase the national deficit. This opposition led to a public fallout between the two and threatened to cut down numerous subsidies and contracts that SpaceX and Tesla get. If Trump suspends them, Musk would suffer a loss of billions of dollars, and SpaceX’s government contracts, including NASA’s lunar lander program and satellite internet services, would suffer. SpaceX received $3.8 billion in 2024 as federal grants and has $22 billion in government contracts. Musk responded by claiming to decommission SpaceX’s Dragon spacecraft that is used to transport astronauts to the International Space Station (ISS).

Despite the discomfort that the bill has caused to many both in the government and outside, it provides clear benefits to citizens in higher income groups and businesses and prioritizes armed services. Wealthy states like California or New York would benefit from the uplifting of the SALT cap, while families get a boost in child credit lines. However, for the people in the low-income groups, the bill brings no good news. It is rather pushing them to the periphery and putting them at a higher risk of losing health insurance, food aid, and education loans. Although there has not been a direct cut to Medicaid for seniors, older people from low-income groups would bear the brunt if they failed to fulfill the work mandate. Middle-class families mostly remain unaffected except for the existing benefits that come from the 2017 tax cut.

The package is expansionary in the short term and celebrated in the Grand Old Party (GOP) constituencies but would be detrimental for the fiscal stability and working Americans. The only winners in the plan are wealthy Americans, while the poor are left vulnerable. Nonetheless, there are not any ‘surprises’ that the bill has; it clearly follows on the promises that brought Trump a second term. It targets tax cuts, pushes for border walls, and cuts down the welfare spending of the government by ‘justifying’ taxpayers’ money.