By Stacy M. Brown
BlackPressUSA.com Senior National Correspondent
The new budget framework approved by Congress may result in sweeping changes to the federal safety net and tax code. The most significant benefits would flow to the highest earners while millions of low-income families face cuts. A new analysis from Yale University’s Budget Lab shows the proposals in the House’s Fiscal Year 2025 Budget Resolution would lead to a drop in after-tax-and-transfer income for the poorest households while significantly boosting revenue for the wealthiest Americans. Last month, Congress passed its Concurrent Budget Resolution for Fiscal Year 2025 (H. Con. Res. 14), setting revenue and spending targets for the next decade. The resolution outlines $1.5 trillion in gross spending cuts and $4.5 trillion in tax reductions between FY2025 and FY2034, along with $500 billion in unspecified deficit reduction.
Congressional Committees have now been instructed to identify policy changes that align with these goals. Three of the most impactful committees—Agriculture, Energy and Commerce, and Ways and Means—have been tasked with proposing major changes. The Agriculture Committee is charged with finding $230 billion in savings, likely through changes to the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. Energy and Commerce must deliver $880 billion in savings, likely through Medicaid reductions. Meanwhile, the Ways and Means Committee must craft tax changes totaling no more than $4.5 trillion in new deficits, most likely through extending provisions of the 2017 Tax Cuts and Jobs Act. Although the resolution does not specify precise changes, reports suggest lawmakers are eyeing steep cuts to SNAP and Medicaid benefits while seeking to make permanent tax provisions that primarily benefit high-income individuals and corporations.
To examine the potential real-world impact, Yale’s Budget Lab modeled four policy changes that align with the resolution’s goals:
- A 30 percent across-the-board cut in SNAP funding.
- A 15 percent cut in Medicaid funding.
- Permanent extension of the individual and estate tax cuts from the 2017 Tax Cuts and Jobs Act.
- Permanent extension of business tax provisions including 100% bonus depreciation, expense of R&D, and relaxed limits on interest deductions.
Yale researchers determined that the combined effect of these policies would reduce the after-tax-and-transfer income of the bottom 20 percent of earners by 5 percent in the calendar year 2026. Households in the middle would see a modest 0.6 percent gain. However, the top five percent of earners would experience a 3 percent increase in their after-tax-and-transfer income.
Moreover, the analysis concluded that more than 100 percent of the net fiscal benefit from these changes would go to households in the top 20 percent of the income distribution. This happens because lower-income groups would lose more in government benefits than they would gain from any tax cuts. At the same time, high-income households would enjoy significant tax reductions with little or no loss in benefits.
“These results indicate a shift in resources away from low-income tax units toward those with higher incomes,” the Budget Lab report states. “In particular, making the TCJA provisions permanent for high earners while reducing spending on SNAP and Medicaid leads to a regressive overall effect.” The report notes that policymakers have floated a range of options to reduce SNAP and Medicaid outlays, such as lowering per-beneficiary benefits or tightening eligibility rules. While the Budget Lab did not assess each proposal individually, the modeling assumes legislation consistent with the resolution’s instructions. “The burden of deficit reduction would fall largely on those least able to bear it,” the report concluded.
