The U.S. Congress has passed a major bill to reduce taxes and cut some welfare payments.
Independent analysis shows the bill will increase the country’s debt by trillions of dollars over the next decade.
President Donald Trump gave the legislation the official title “one big beautiful bill”. Opponents called it the “big ugly bill”.
Trump insisted Congress pass the bill before the 4 July public holiday.
Tax changes
There are two main categories in the bill: tax changes and spending cuts.
Taxpayers will be able to deduct up to $US40,000 ($AU61,000) from their federal taxes, based on how much they pay in state and local taxes.
Taxes on tips for hospitality workers and on overtime pay will also be scrapped, fulfilling a campaign promise.
Tax breaks introduced by former President Joe Biden, intended to encourage the uptake of solar and wind projects, will be phased out.
Trump introduced lower tax rates in 2017, during his first term. This bill makes them permanent.
Standard rates of deduction will increase by $750 for individuals and $1,500 for couples. Businesses will also be able to deduct a greater amount of “research and development” (R&D) expenses.
Analysis from the University of Pennsylvania has shown the top 10% of income earners will receive around 80% of the legislation’s total value.
The bill also contains increases to security and military funding.
Spending cuts
The Government will cut $US1 trillion over the next decade from Medicaid, a health insurance scheme covering low-income earners, Americans with
disabilities, and pregnant women.
Its funding is shared between the federal and state governments.
Funding for the Supplement Nutrition Assistance Program (SNAP, also known as ‘food stamps’) will also be limited. SNAP is available for low-income earners and the elderly. It is accessed by 40 million people.
The bill will change the eligibility for Medicaid and SNAP.
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Able-bodied participants will need to work, volunteer, or take classes for a certain number of hours in order to gain access to either program. Medicaid recipients will need to re-apply every six months instead of once a year.
The legislation also defers more of the funding responsibility to the states. Not every state will be expected to fill the funding gaps, however.
It’s estimated three million fewer people will have access to SNAP.
Congress
Republicans narrowly control both chambers of Congress: the House of Representatives and Senate.
Democrats opposed the cuts to Medicaid and SNAP, objecting to tax breaks for “billionaires” and “corporate special interests”.
Leader of the Democrats in the Senate Chuck Schumer told the chamber: “People will get sick and die, kids will go hungry and the debt will explode to levels we have never seen.”
Some Republicans opposed the bill, citing concerns about growing debt.
Controversy over the bill led to former DOGE advisor Elon Musk to step down from his role in the White House.
Senators voted 50-50, with three Republicans objecting. Vice-President JD Vance was called in to cast the tie-breaking vote, following tradition.
The House then voted in favour of the bill 218-214, with two Republicans opposing.
House Speaker Mike Johnson applauded its passage, saying it “lowers taxes for families... secures the border... and makes government more efficient.”
Meanwhile, House Democrat leader Hakeem Jeffries broke a record speaking for nearly nine hours in opposition to the legislation.
Trump's response
Trump said the tax and spending changes will make Americans “Richer, Safer, and Prouder”.
“Our Party is UNITED like never before and, our Country is ‘HOT’,” Trump wrote in a social media post.
The President had pushed for the bill to be passed before the 4 July public holiday, commemorating the U.S’ independence from Britain.
He will sign the bill into law at a White House ceremony at 4pm on Friday (local time).
