Subsidizing the Upper Income Citizens by Stiffing Lower Income Citizens

“Distributional Effects of H.R. 1, the One Big Beautiful Bill Act”

CBO and the staff of the Joint Committee on Taxation (JCT) analysis of the budgetary and distributional effects of H.R. 1 or the “One Beautiful Piece of ? as passed on May 22, 2025.

CBO estimates, on average, household resources would increase over the 2026–2034 period. This is mainly because of reductions in how much households owed in federal taxes. The effects on household resources would “vary” by channel and across the income distribution.

Budgetary effects of the legislation effect on household resources through four channels 2026–2034 period:

• Federal taxes and cash transfers would increase household resources by $3.1 trillion, on net (in 2025 dollars). In particular, changes to federal tax provisions, especially extensions of provisions of the 2017 tax act and reductions in subsidies for health insurance under the Affordable Care Act, would affect household resources. Changes to student loan programs would also affect those resources.

• Federal and state in-kind benefits would decrease household resources by $1.0 trillion, mostly because federal spending on benefits provided through Medicaid and SNAP would be lower. Changes to program benefits that states made in response to changes in federal policy would also reduce household resources.

• States’ fiscal responses would increase household resources by $10 billion, on net. Those responses consist of the tax and spending changes implemented by states in response to changes to their fiscal position. In CBO’s assessment, Medicaid eligibility changes under the legislation would reduce states’ spending on Medicaid benefits. Those decreases would be largely offset by the new matching requirements for SNAP, which would increase state spending. In CBO’s analysis, states, in the aggregate, would use the resulting overall reduction in benefit spending to increase spending in other areas and to reduce taxes, both of which would increase household resources.

• Other spending and revenues would increase household resources by $129 billion, on net. The spending and revenues in this category were allocated as if they were public goods. This category includes federal spending on defense, border security, and infrastructure. Those outlays are partially offset by reductions in federal pensions, receipts from spectrum auctions, and changes in receipts and outlays associated with changes to emissions regulations.

Impact of the Trump’s H.R. 1 as passed on May 22, 2025 on Households

CBO estimates that if the legislation was enacted, U.S. households, on average, would see an increase in the resources available to them over the 2026 -2034 period. However, the changes would not be evenly distributed among households. The agency estimates resources would decrease for households toward the bottom of the income distribution. Resources would increase for households in the middle and top of the income distribution.

AB: The impact of H.R.1 favors the upper income bracket so much it erases the impact to the those in the lower income brackets.

The analysis includes most provisions of H.R. 1. The distributional analysis of changes to taxes and tax-related outlays is based on an analysis done by the JCT. The analysis in this letter excludes any tax provisions not allocated in JCT’s distributional analysis of H.R. 1.3. The CBO’s analysis does not reflect the effects of the additional debt-service costs or the macroeconomic effects of the bill.

Figure 1

Resources for households in the lowest decile of the income distribution would decrease by about $1gure 1,600 per year (in 2025 dollars) compared with their projected income in CBO’s baseline projections (Figure 1).

Figure 2

The decrease amounts to 3.9 percent of their income (Figure 2). Those projected decreases are mainly attributable to reductions in in-kind transfers, such as Medicaid and SNAP.

Who Benefits?

Households in the fifth and sixth deciles (middle of the income distribution) experience resource increases by $500 (0.5 percent of projected income) and $1,000 (or 0.8 percent of projected income) respectively.

Households In the highest decile and on average, would experience resource would experience increase over the projection period by about $12,000. This amounts to 2.3 percent of their projected income. Those projected increases are mainly attributable to reductions in the taxes households owe in that decile owe.

The CBO’s analysis combined the four channels (described above) through which household resources would be affected. Each channel is allocated to households in different ways and would affect households differently. Some differences greater than others.