The lowest-income earners will lose an average $1,200 in overall household resources each year resulting from the Act of 2025 (P.L. 119-21), while others will see increases, including those in the middle and top percentiles, the Congressional Budget Office told Democrat leaders.
The CBO previously analyzed the distributional effects of the House version of what was then titled the One Big Beautiful Bill Act in June. Four key congressional Democrats asked CBO to provide a similar analysis for the final 2025 budget reconciliation package signed into law by President Trump July 4.
Philip Swagel, director of the CBO, responded in an August 11 letter to Senate Minority Leader Chuck Schumer (D-NY), House Minority Leader Hakeem Jeffries (D-NY), Senate Budget Committee Ranking Member Jeff Merkley (D-OR), and House Budget Committee Ranking Member Brendan Boyle (D-PA).
While households are expected to see an overall increase in resources through 2034, the changes from the Act “will not be evenly distributed among households,” wrote Swagel in his letter. CBO forecasted a decrease “for households toward the bottom of the income distribution.”
Specifically, the “lowest decile” of the distribution will go without 3.1% “of their income” compared to the agency’s January baseline projections. But those in the fifth and sixth deciles, which reflect middle-income earners, will see an increase in household resources between an annual average of between $800 and $1,200.
Comparatively, the top decile will receive a windfall of $13,600 every year, the CBO estimates.
A large contributing factor for this discrepancy is the Act’s cuts to Medicaid and the Supplemental Nutrition Assistance Program, or SNAP. On net, these cuts will decrease household resources by $900 billion. “Changes to program benefits that states make in response to changes in federal policy will also reduce household resources,” Swagel said.
He explained that those decreases are “reductions in in-kind transfers.” But this will be slightly offset by federal tax and cash transfers that will benefit all households.” In particular, changes to federal tax provisions, especially extensions” of the Tax Cuts and Jobs Act “and limitations on eligibility for subsidies for health insurance under the Affordable Care Act, will affect household resources,” the CBO reported.
Tax projections are based on estimates by the Joint Committee on Taxation. The CBO adjusted its allocations based on the Act’s changes to healthcare, education, and spending on other government programs.
Swagel said the agency “accounted for state spending on Medicaid and SNAP … as well as for changes in taxes and other spending implemented by states in response” to the budgetary effects of new federal policies.
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