On July 4, President Trump signed a large federal budget bill into law. The bill was passed through the budget reconciliation process, which allowed for it to pass the Senate with a simple majority (50-votes). The 2025 budget reconciliation package consists of more than three hundred provisions including tax cuts for the wealthy, increases to immigration enforcement, and massive spending cuts to social safety net programs such as Medicaid and Supplemental Nutrition Assistance Program (SNAP). The implementation of the law’s provisions are staggered over the next decade, with many of the tax provisions already in effect, while spending cuts don’t start until 2026.   

The 2025 reconciliation package made significant changes in tax policy, including $4.5 trillion in tax cuts over the next decadeand made significant changes to social safety net programs in order to pay for those cuts. This includes: 

• Permanently extending provisions from the 2017 Tax Cuts and Jobs Act such as the top marginal tax rate cuts, estate and gift tax exemptions, and deductions for pass-through business owners.   

• Temporarily increasing the state and local tax (SALT) deduction from $10,000 to $40,000.  

• Creating a new “No Tax on Tips” and “No tax on overtime” provision under the guise of helping working people, the package also includes a u, which allows workers to deduct up to $25,000 of qualified tips they receive in a year for tax years 2025-2028. However, many tipped workers earn so little that they do not pay federal taxes and would not benefit from this deduction. 

• Phases out certain clean energy tax credits that were enacted under the Inflation Reduction Act.   

• Cuts over $900 billion from Medicaid—the largest cut in the program’s history—and imposes strict work requirements to the program. Overall, it is estimated that the cuts to Medicaid—coupled with the expiration of Affordable Care Act subsidies—will result in 15 million Americans losing their health insurance. 

• $186 billion in cuts to SNAP and shifts the bulk of the program’s costs to the states. In addition to the significant spending cuts to SNAP, the law also imposes strict work requirements for those trying to access the country’s largest food assistance program. Overall, it is estimated that the cuts and implementation of work requirements to SNAP will impact the more than 22 million Americans who rely on the program. 

• Gives $150 billion spending increase for immigration enforcement to help the Trump administration meet their mass deportation goals, which will cause massive job losses for both immigrants and U.S.-born workers. 

• Creates a new tax writeoff to create a school-voucher-like program – establishing a new tax credit for individuals who donate to scholarship funds that fund private school tuition.  

Impact:  The 2025 reconciliation package is the largest direct transfer, through policy, of wealth from working families to the ultrawealthy. The package is estimated to deliver $1 trillion in tax cuts for the top 1 percent while cutting more than $1 trillion in social safety net programs. Overall, more than 15 million Americans will likely lose health insurance and more than 22 million Americans will likely be exposed to food insecurity as a result of the legislation. Further, the Congressional Budget Office estimates that the 2025 reconciliation package will increase the deficit by nearly $4 trillion. It is estimated that under this law, the average family making under $50,000 will receive $250 in tax cuts in 2027 while the average tax earner making $1 million would receive over $100,000 in tax breaks.