Analysis reveals that Trump's tax legislation would significantly increase United States debt, with billions at stake. - Potential revenue increase in U.S. debt due to Trump's tax proposals
Assessing the impact on the US economy, the Congressional Budget Office (CBO) predicts a monumental surge in the American budget deficit by a staggering $2.8 trillion over the next decade, with this projection accounting for favorable economic factors, as declared on Tuesday (local time). This comes hot on the heels of the CBO's earlier prediction, made two weeks ago, that the US public debt would increase by $2.4 trillion under the same circumstances, with these figures adjusted to account for interest costs, amounting to $3 trillion.
Trump's "Magnificent Money-Maker" Meeting Resistance in Congress
The latest CBO estimates contradict the assertions of Trump's Republican allies, who highly tout the comprehensive package's potential ability to fortify the US economy, thereby enabling a reduction in public debt due to heightened revenue generation. On Tuesday, Senate Republican leader John Thune touted the bill's capacity to foster "a stronger and more prosperous America."
The bill, known as the One Big Beautiful Bill Act, had already gained approval from the House of Representatives in May. Currently, Senate Republicans are deep in discussions regarding a revised version. For the legislation to become law, both chambers of Congress must forge a consensus on a unified version which will then be handed over to Trump.
The proposed bill will maintain the substantial tax cuts first introduced during Trump's presidency in 2017 until 2021, without which these cuts would expire at the end of this year. To compensate, sweeping reductions are planned for the Medicaid healthcare program, primarily serving lower-income and elderly citizens.
Key Highlights:
- The US federal budget deficit is projected to increase substantially over the coming decade, with the largest deficit growth predicted for around 2027.
- Federal taxes and transfers, as per the bill, would collectively increase household resources by approximately $3.1 trillion in 2025 dollars, chiefly through tax reductions aimed at higher-income families.
- Middle-income households are set to receive significantly smaller increases in resources. Households in the top income decile could expect annual gains of around $12,000, about 2.3% of their projected income, largely attributable to tax cuts.
- The CBO highlights that increased deficits and debt, coupled with these income distribution effects, suggest that the bill's economic impact would disproportionately benefit wealthier households, while simultaneously raising concerns over long-term fiscal sustainability due to growing debt levels.
- Tax Reform
- Donald Trump
- USA
- Congressional Budget Office (CBO)
- Medicaid
The Congressional Budget Office (CBO) has presented fresh estimates suggesting that Donald Trump's tax reform could add an estimated $2.8 trillion to the USA's national debt over the next decade, a figure that contrasts with the claims of Trump's Republican allies who claim the reform will bolster the economy and decrease public debt. The CBO's findings are significant as they come during ongoing negotiations in the Senate for a revised version of the tax reform bill, which will require consensus from both chambers of Congress before it can be presented to Donald Trump. The bill, known as the One Big Beautiful Bill Act, also includes proposed reductions to the Medicaid healthcare program.
