Republican Tax Bill Will Add $2.4 Trillion to Deficit: CBO
Happy Wednesday! Lawmakers continue to wrangle over the Republican reconciliation bill, with a new CBO score adding more fuel to a fiery debate that is being stoked by Elon Musk's continued criticism of the legislation. Meanwhile, Office of Management and Budget Director Russell Vought testified before Congress this afternoon, calling on members to quickly pass a rescissions bill that would lock in about $9.4 billion in spending cuts identified by the DOGE cost-cutting project, and vowing to deliver the 2026 budget bill once the reconciliation package is complete.
Now onto your daily update.
Republican Tax Bill Would Add $2.4 Trillion to the Deficit, CBO Says
The sweeping package of tax and spending cuts passed by House Republicans last month would add $2.4 trillion to the deficit over 10 years and result in nearly 11 million people losing health insurance coverage, the Congressional Budget Office estimated in an analysisreleased Wednesday. The increase in the number of uninsured includes roughly 1.4 million people who would no longer be covered because of their immigration status.
House Republicans had made last-minute changes to their bill and approved it in a 215-214 vote without a full score of the final package from the budget office. The latest analysis is largely in line with an earlier CBO projection that the GOP plan would add $2.3 trillion to the deficit - but the late changes made by House Republican leaders, which helped win over both moderate and conservative holdouts who were threatening to sink the bill, ended up increasing the overall cost of the bill. The CBO analysis forecasts a roughly $3.7 trillion reduction in 10-year revenue due to tax cuts, with that cost partially counterbalanced by $1.3 trillion in spending cuts.
President Donald Trump, the White House and congressional Republicans have repeatedly bashed the CBO, claiming that its estimates fail to factor in the tremendous growth that they say the legislation will unleash. House Speaker Mike Johnson went so far as to claim in a television interview on Sunday that the bill would actually reduce the deficit.
The CBO analysis does not include those so-called dynamic effects, though the budget office said an analysis of the economic effects of the bill is in the works. The latest analysis also doesn't include the cost of additional interest payments on the higher debt, which would push the total cost of the bill toward $3 trillion.
The package is now before the Senate, where this highly anticipated new CBO analysis might add to the headwinds that could slow or derail the legislation. It certainly offered new ammunition to critics of the plan.
Even before the latest CBO numbers came out, some Republican senators have been criticizing elements of the package, with conservatives complaining that it fails to cut enough spending and others expressing concerns about the cuts to Medicaid or clean energy tax breaks.
Tariffs would reduce deficit: The CBO also issued a score of Trump's tariff plan on Wednesday. It found that the tariffs would produce an estimated $2.8 trillion in revenue over 10 years, assuming the tariffs stayed at the same relatively high level as in mid-May. The tariffs would also shrink the economy relative to the baseline while raising inflation.
The assumption that Trump's tariff regime will be permanent is a bit shaky, given the uncertain dynamics of trade over time, legal challenges to the Trump plans and the president's expressed interest in reducing tariffs through deals with virtually every country in the world.
Nevertheless, the White House cited the tariff score as it argued that the GOP tax bill will not increase the deficit. "If you cite the CBO's faulty score, you must also cite CBO's forecast that President Trump's tariffs will cut the deficit by $2.8 trillion over the next decade," the White House said in a statement.
More attacks from Musk: Billionaire Elon Musk on Tuesday slammed the bill as a "disgusting abomination"because it would add trillions to the nation's "crushingly unsustainable debt." Musk continued his attacks on the legislation on Wednesday. "A new spending bill should be drafted that doesn't massively grow the deficit and increase the debt ceiling by 5 TRILLION DOLLARS," he posted on X. A second post urged his followers: "Call your Senator, Call your Congressman, Bankrupting America is NOT ok! KILL the BILL."
It's not clear whether that pressure from Musk will have any effect on lawmakers, many of whom have downplayed or dismissed the Tesla founder's criticisms. At a news conference Wednesday before Musk's latest barrage, Johnson told reporters he thinks Musk is "flat wrong" and offered to speak with him again. "I think he's way off on this, and I've told him as much, and I've said it publicly and privately," Johnson said.
Democrats blast fiscal and health costs: Democrats used the CBO's latest analysis to repeat their criticisms of the Republican bill. "Even after the biggest cuts to health care and food assistance in U.S. history, the Republican bill for billionaires would still add a historic amount to our debt - all to give the ultra-rich more tax breaks," Rep. Brendan Boyle, the top Democrat on the House Budget Committee, said in a statement. "Republicans cry crocodile tears over the debt when Democrats are in charge - but explode it when they're in power. The Republican debt crisis will destabilize the economy and drive up mortgage rates, car loans, and credit card bills - making life more expensive for everyone."
Democratic lawmakers also pointed to another new analysis from the CBO that said the GOP budget bill and likely changes to policies surrounding the Affordable Care Act would lead to a total of 16 million people losing health coverage - 10.9 million as a result of the new Republican legislation and 5.1 million from the end of an expanded ACA tax credit and a proposed administration rule for ACA marketplaces. (In its analysis of the GOP megabill, CBO also estimated that benchmark premiums for insurance plans purchased on the Affordable Care Act exchanges would be lower by an estimated 12.2 percent by 2034.)
"The Republican health agenda is all about making it harder to get health care," Reps. Frank Pallone and Richard Neal and Sen. Ron Wyden said in a joint statement. "Every step of the way, this abomination of a bill creates barriers and mazes designed to demoralize and discourage Americans as they try to get affordable health care. The results of this cruel system are clear: millions will lose coverage, health care costs will go up for all Americans, and tens of thousands will die."
Republicans have insisted that they are only targeting waste, fraud and abuse in Medicaid and removing ineligible people from the program.
"Whether you call it a cut in benefits or not, an estimated 10.9 million people would lose health insurance as a result of changes to Medicaid and the ACA passed by the House," Larry Levitt, executive vice president for health policy at KFF, a nonpartisan health care foundation, wrote on X. "This would be the biggest rollback in federal support for health care ever."
The bottom line: Key Republican senators headed to the White House on Wednesday to meet with the president and try to resolve some differences on the bill. Changes are likely in the Senate, and it's clear that the battle over Trump's "big, beautiful bill" is far from over.
Trump Calls for Elimination of the Debt Limit
President Donald Trump said Wednesday that the federal debt limit should be eliminated, adding another potential hurdle in the negotiations over Republicans' reconciliation bill.
"The Debt Limit should be entirely scrapped to prevent an Economic catastrophe," Trump said on his social media platform. "It is too devastating to be put in the hands of political people that may want to use it despite the horrendous effect it could have on our Country and, indirectly, even the World."
Trump noted that he was in agreement with Democratic Sen. Elizabeth Warren, who has also called for ending the federal debt limit. "[A]fter all of these years, I agree with Senator Elizabeth Warren on SOMETHING," he wrote. "Let's get together, Republican and Democrat, and DO THIS!"
The House GOP plan would raise the debt limit by $4 trillion, while the Senate is considering a $5 trillion increase. But the idea of raising the debt ceiling by such a large amount isn't sitting well with some fiscal conservatives, including Sen. Ron Paul, the Kentucky Republican.
Saying the nation could run out of fiscal room to maneuver later this summer, Treasury Department Secretary Scott Bessent has urged Congress to raise or otherwise neutralize the debt limit by mid-July.
About 40% of Taxpayers Will Pay No Federal Income Tax in 2025: Analysis
Some taxpayers earn too little to owe any federal income tax, and a new analysis from the Urban-Brookings Tax Policy Center finds that about 40% of all "tax units" will owe no income tax to the federal government in the 2025 tax year.
"Tax unit" is a technical term that excludes people who are dependents of taxpayers, and TPC estimates there will be 192 million tax units in the U.S. in 2025. Of that group, 161 million are expected to file taxes, with 116 million of them showing a federal income tax obligation of at least $5.
That leaves 76 million tax units that owe no federal income tax, or 39.6% of the total. That percentage is projected to decline slightly over the next decade, falling to 33.5% by 2035.
Key details: Income level, combined with other factors such as household size and composition, is the key determinant of whether a tax unit owes federal income tax. TPC estimates that in 2025, about 70% of those not owing federal income taxes will earn less than $75,000, and about 45% will earn less than $40,000.
"These households include families with children, or older adults living on fixed incomes," TPC says. "They include those with incomes too low to owe federal income tax after accounting for the standard deduction and other deductions or exclusions. They also include those eligible for certain tax credits like the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), which can reduce tax liability below zero."
TPC notes that the standard deduction, which reduces taxable income, plays a significant role in determining who owes no federal income tax. The standard deduction is expected to be more than $30,000 for married couples in 2025.
TPC also emphasizes that federal income tax is just one of many types of tax. Other common taxes include payroll taxes for Social Security and Medicare, state taxes, sales taxes and tariffs, which are essentially a tax on imports. Most Americans pay at least some of these taxes every year.
Fiscal News Roundup
- Trump Tax Bill Will Add $2.4 Trillion to the Deficit and Leave 10.9 Million More Uninsured, CBO Says – Associated Press
- Trump's Tariffs Would Cut US Deficits by $2.8T Over 10 Years and Shrink the Economy, CBO Says – Associated Press
- The CBO Has Good News and Bad News on Trump Tax Bill – Bloomberg
- 'Kill the Bill': Elon Musk Doubles Down on Criticism of Trump's GOP Tax Bill – USA Today
- Trump Is Brushing off Musk's Megabill Attacks - for Now – Politico
- Tuberville Raises Alarms on GOP Food-Aid Plan as He Seeks Governorship – Politico
- 'Where's the Budget?': GOP Lawmakers Implore Vought to Send a Full Request – Politico
- Trump Says 'Too Late' Powell Must Lower Interest Rates After Weak ADP Jobs Report – CNBC
- Sen. Kennedy Grills Lutnick Over Trump's Tariff Goals – Politico
- How Trump's Tariffs and Other Policies Are 'Raising Hell,' According to Business Owners – CNN
- US Economic Activity Ebbs, Prices Rise in Fed's Beige Book – Bloomberg
- Trump Budget Calls for BLS Cuts, Raising Concerns Over Quality of Economic Data – Bloomberg
- US Education Department Threatens Columbia University's Accreditation Over Campus Antisemitism Concerns – CNN
Views and Analysis
- Both Parties Need to Face Fiscal Reality – Allison Schrager, Bloomberg
- MAGA Policies Would Make America Mediocre – Alan S. Blinder, Wall Street Journal
- Meet Elon Musk's Puppet Master: Russell Vought – Timothy Noah, New Republic
- Why Would Trump Gut FEMA and NOAA? – Robert Kuttner, American Prospect
- This Is the True Danger of Trump's Tariffs – Michael W. McConnell, New York Times
- US Tariffs Are as Dangerous as They Are Illegal – Bloomberg Editorial Board
- Congress Is Subsidizing the Wrong Neighborhoods – Kevin Corinth and Naomi E. Feldman, New York Times
- Skimping on Inflation Data Is Not Worth the Risk – Jonathan Levin, Bloomberg
- Let Us Count the 3,515 Ways in Which Democrats Are Lame – Dana Milbank, Washington Post