By Angelo Lynn
Editor’s note: Angelo Lynn is the owner and publisher of the Addison Independent in Middlebury, a sister paper of the Mountain Times.
As Senate Republicans wrestle to pass President Trump’s “big bill” by a self-imposed July 4 deadline, Vermonters should understand the policy changes that will impact their lives. At over 1,000 pages, the bill is deliberately packed with so many items as to confuse the public and Congress — successfully on both counts.
Even so, here are a few of the highlights as it currently stands:
Tax cuts, who benefits?
The most popular aspect of the bill is that it maintains the tax cuts passed during Trump’s first term in 2017. Those cuts overwhelmingly favored the wealthy and contributed to a sharp increase in the nation’s wealth gap, but the cuts also extended tidbits of relief to all except the bottom tier of taxpayers. Many Democrats support extending the tax cuts for the lower-and mid-income ranges but oppose tax cuts for the wealthy.
Here are a few of the bill’s specific proposals pertaining to the tax cuts:
According to a simplified USA Today breakout, if your income falls under $17,000 annually, you’re likely to lose benefits from Medicaid, health insurance markets, food assistance programs like SNAP and student loans. In dollar terms, USA Today estimates you’ll lose $1,035 or see a 10.8% loss in benefits.
If you’re among the super-wealthy and your income is above $4.3 million, you’ll save on average $389,200 in taxes (that is, if anyone at that rate pays their full share.)
Those with incomes between $17,000-$50,999 will see a loss of $705 annually, or a 1% loss. Incomes of $51,000-$92,999 will gain 1%, or about $845. Those with incomes between $93,000-$173,999 see a gain of 2.4% or $3,245; those between $174,000-$262,999, will see benefits of 2.9% or $6,050; and those between $263,000-$387,999 will gain $8,835 or 2.8%. From there the benefits bump up. The average gain for those with incomes between $388,000-$987,999 are $19,965 or 3.5%; while those making between $988,000-$4.3 million see an average benefit of $44,365 and up, to more than $300,000.
In addition to extending the tax cuts from the 2017 tax bill, the House version of the bill gives people in high-tax states like California, New York, New Jersey, and Vermont, a bigger income tax deduction for state and local taxes, or SALT. The House version raises the deduction from $10,000 to $40,000, but the Senate version keeps the $10,000 cap.
The bill also would eliminate some taxes on tips and overtime. The Senate version of the bill puts a cap on those exemptions, including: the first $25,000 of tips would be tax-deductible through 2028 with a $150,000 income limit; and the first $12,500 of overtime pay would be tax-deductible through 2028 with a $150,000 income limit.
A person over 65 could deduct an additional $4,000 if they make less than $75,000, but only through 2028. The Senate version increases the deduction to $6,000.
Another significant change is the bill allows for an even larger tax exemption for large estates. The House version allows people to pass on $13.99 million of a $15 million estate untaxed, while taxing just $1.01 million at 40%. So, taxes owed on a $15 million inheritance would be $404,000. Without the change, the almost $14 million exemption would expire at the end of 2025 and revert to just over $7 million exemption.
Increases in the popular child tax credit, championed by Democrats, would rise to $2,500 through 2028 before returning to the current $2,000. Without changes, the credit would fall to $1,000 at the end of 2025.
To sweeten the pot for everyone, the bill would gift children under 8 with $1,000 each to open special savings accounts, with tax-free contributions to those accounts limited to $5,000 annually until the child is 18.
Controversially, the bill spends $5 billion annually for the next four years to subsidize non-public school education, plus more than a generous scholarship allowance for students attending private schools.
In sum, Republicans are betting the public’s appreciation to get any tax cut, along with special benefits to their core MAGA constituents, will outweigh the pain caused by cuts to services.
Other costs
About $150 billion more would go for defense, including $20 billion for what Trump calls a “Golden Dome” missile defense system.
Border security would increase from $10 billion spent annually to $150 billion, a huge change that will pile $50 billion into completing the wall on the southern border; $45 billion building detention centers; $8 billion on additional immigration officers; and $14 more billion spent on deportations.(Critics are already sounding alarms that much of this money for border security and the extra defense spending will benefit friends and supporters of Trump in the defense industry.)
And in a little discussed item, according to USA Today, the bill would significantly increase taxes on private college endowments. The tax rate for endowments between $500K-$750K would be 1.4%; for endowments over $2 million, the tax rate would be 21%.
Cuts to services
To finance all those tax cuts, Trump and this Republican-led Congress are calling for significant cuts to social services and much more. Here are a few:
Medicaid cuts of at least $625 billion, or higher in the Senate version, while shifting more of the burden onto the states. More than 10%, or 7.6 million people (mostly children), could lose their health care insurance. The measure also adds work requirements for adults enrolled in Medicaid expansion.
SNAP benefits, or what had been called Food Stamps, would be cut $300 billion over 10 years, and would require states to provide more funding for food assistance programs in the future. SNAP benefits would only be provided to permanent, legal residents and new work requirements for those people 55-64 would be imposed.
The bill would repeal the $7,500 tax credit for electric cars, along with other rules encouraging Americans to use electric vehicles and move away from fossil fuels.
Many other cuts to renewable energy initiatives, social services, higher education, the arts, science in all fields, health care subsidies, disability payments, student loans, Veteran Affairs and much more are included in the bill.
Cost of the bill
Republicans want Americans to believe the cost of the bill is only $440 billion by failing to count the cost of extending the tax cuts. More rational folks admit the cost is closer to $2.4 trillion, not including the huge cost that interest will add to the bottom line. Over the upcoming 10 years, the bill is expected to add $3.3 trillion to the current $29 trillion national debt.
The interest on that debt will total $13.8 trillion over the next decade with annual interest costs projected to rise from $952 billion in 2025 to nearly $1.8 trillion in 2035.
As a share of the economy, interest costs are projected to reach 3.2% of GDP in 2026, surpassing the previous high set in 1991. They are expected to climb to 4.1% of GDP by 2035.
Interest costs currently represent the third largest spending category in the budget, exceeded only by Medicare and Social Security, but are higher than National Defense. Those rising costs have some Republican deficit-hawks vowing to vote against the bill and push for more cuts to services (rather than reduce tax cuts), while Democrats are expected to uniformly reject the bill.
To recap, the House narrowly passed its version of the bill, 215-214, back on May 22. The Senate, comprised of 53 Republicans and 47 Democrats, is hoping to take up the bill this weekend. If the Senate passes the bill, it will go to conference between the House and the Senate with the goal to work out their differences by the July 4 weekend.
Elections, readers should note, do make a difference.
