The Financial Cost of the House-Passed Budget Bill

This report provides an updated analysis of the budget bill recently passed by the House. The bill primarily extends and enhances the tax provisions in the 2017 Tax Cuts and Jobs Acts (TCJA) that are set to expire at the end of 2025. The bill also includes versions of several policies put forth by the President during the presidential campaign.¹ This report also includes estimates from committees beyond Ways and Means, which were not included in The Budget Lab’s analysis released on May 16, as well as the update to the state and local tax (SALT) deduction that was announced just prior to the bill’s passage.

Note: this analysis provides a conventional score for these proposals. In this analysis we do not look at the distributional implications of this proposal or its macroeconomic implications. We thus do not account for any additional growth (or slowing of growth) that may emerge in the short or long run from passing this bill, nor do we analyze the impact of the increased debt burden on interest rates.

Because the tax provisions are designed to fit within the $4.5 trillion allowance set by the 2025 budget resolution, many are temporary in nature. Given how unusual it is for Congress not to allow these policies to be extended (as seen in the current debate over the expiring provisions from 2017), we also offer a long-term lens, should those policies be extended permanently.

• The baseline cost of the bill as passed, assuming temporary provisions actually expire, over the 2025-2034 window is $2.4 trillion and over the 2025-2055 window is $10.8 trillion.
  • Tariff revenue is not currently in the legislation. However, if tariff revenue reflecting the state of tariffs as of May 28 was included in the score, it would cost $1.8 billion over the 2025-2034 window and $8.2 trillion over the 2025-2055 window.
• If we assume that the temporary provisions become permanent (in other words, if we assume that lawmakers keep extending these provisions), the cost of the bill passed by the House over the 2025-2034 window is $4.0 trillion and over the 2025-2055 window is $18.7 trillion.
  • If possible tariff revenue was included in the score, the cost would be $3.3 trillion over 10 years and $16.1 trillion out to 2055.

Nominally, the purpose of the budget reconciliation is to extend the tax provisions established in the TCJA. These provisions include lower individual rates, increased standard deduction, a larger Child Tax Credit (CTC), and a deduction for qualified business income (QBI).

However, there are a substantial number of new tax-related provisions that were included in the House-passed version of the bill, including so called “Trump accounts,” which would allow parents to give more money to their children tax-free; the removal of the excise tax on firearms; and an increase in the SALT limit to $40,000 (accompanied by income phaseouts and limits). The House passed bill also includes several of the President’s campaign promises such as “no tax on tips,” “no tax on overtime,” and a larger standard deduction for older Americans (presumably to act as a version of “no tax on Social Security”). The bill included offsets through repealing or phasing out Inflation Reduction Act energy credits, imposing new taxes on foreign corporations, and restricting ACA subsidies, as well as spending cuts that are concentrated in the Supplemental Nutrition Assistance Program (SNAP) and Medicaid. This updated analysis takes these spending cuts into account.

The budget bill the House passed last week would substantially add to the deficit, particularly if we assume the tax provisions become permanent. If we account for the likelihood that these provisions would become permanent, in 2055 the debt-to-GDP ratio would be approximately 191 percent. For context, the only countries with a higher debt-to-GDP ratio currently are Japan and Sudan.

While the impact on the deficit and the debt is not the only important factor to consider in evaluating the impact of this bill, our analysis shows that the impact of this bill on the fiscal picture of the nation would be substantial.