What you need to know
In a 215-214 vote on May 22, 2025, the House of Representatives passed the 2025 Budget Reconciliation bill, also referred to as the "One Big Beautiful Bill,” sending it to the Senate. The legislation represents a major policy shift, affecting programs ranging from Medicaid work requirements to how overtime pay is taxed. But what exactly does it do? How will it affect the federal deficit?
- We analyze the major taxing and spending provisions in the 2025 House Budget Reconciliation proposal.
- Additional details on the Medicaid work requirements are here.
- A subsequent policy brief will cover the many smaller policy changes included in the bill.
Where the Bill Saves Money
According to the nonpartisan Congressional Budget Office (CBO), the largest projected savings come from changes in the Medicaid program, student loans, and the Supplemental Nutrition Assistance Program (SNAP).
The most substantial deficit reduction measure comes from a Medicaid policy change. All states would be required to impose work and community engagement requirements for adults without dependents who don’t have certain disabilities. Those who fail to meet the 80-hour monthly minimum would lose coverage. It is also likely that some eligible recipients will be dropped because they fail to meet new certification requirements. Depending on how states implement the new regulations, CBO estimates savings of up to $710 billion over ten years.
For student loans, the budget will limit income-driven repayment options and make other changes to payment levels. CBO projects that these changes will increase federal tax revenues by $294.6 billion over the next ten years.
Finally, beginning in 2028, states must cover 5% of SNAP benefit costs. Additionally, states with high payment error rates must pay a larger share of SNAP costs. The CBO estimates these changes will reduce the federal share of the program’s cost by $90 billion over ten years.
Where the Bill Spends
The reconciliation bill's major spending increases come from changes in tax policy. The reconciliation bill's largest tax code change is the extension of the 2017-era income tax cuts, which are currently scheduled to expire at the end of 2025. The extension is projected to reduce federal tax revenues by over $3.5 trillion over the next ten years.
It is important to understand that this provision extends an existing tax reduction rather than implementing a new tax cut. If congressional Republicans allowed the cuts to expire, they would be raising taxes on many Americans, which could stall economic growth. This outcome is due to the fact that the credits were originally enacted in 2017 as temporary changes, which reduced their impact on the national debt as calculated in official statistics such as CBO estimates. At the time, many observers expected the credits to be made permanent in 2025, which is what the House bill does.
Another significant change is the expansion of the Child Tax Credit (CTC). The bill raises the CTC to $2,500 per child from 2025 to 2028 and then reverts to a $2,000 credit (which will then be adjusted for inflation). The expanded credit is expected to reduce federal tax revenue by approximately $187.7 billion over ten years.
Next, the bill includes a new 100% depreciation allowance for qualified production property. The aim is to boost U.S. manufacturing by allowing businesses to immediately deduct the full cost of constructing or purchasing industrial facilities. Depending on how many businesses use the credit, and considering the new taxes these facilities generate, it could reduce federal tax revenue by hundreds of billions of dollars over the next ten years.
The bill also introduces a temporary tax break for overtime pay. From 2025 to 2028, workers can deduct overtime compensation from their taxable income. The CBO projects that this change will reduce federal tax revenue by $124 billion over ten years.
The Takeaway
The House-passed 2025 reconciliation bill proposes large changes to the federal budget and safety net programs.
It is difficult to be precise about how the reconciliation bill will affect future deficits and the national debt. Uncertainties include how economic growth, inflation, and interest rates will change over the next decade, trends in Medicaid and SNAP enrollment, and the number of businesses using the new tax credits.
CBO’s best estimate is that the current bill, if enacted, will add about $2.3 trillion to the national debt over ten years.
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Further reading
Lynch, M. S., & Saturno, J. V. (2021). The Budget Reconciliation Process: Stages of Consideration. Congressional Research Service. https://tinyurl.com/rsa8kyv4
Congressional Budget Office. (2025). Potential Statutory Pay-As-You-Go Effects of a Bill to Provide Reconciliation Pursuant to H. Con. Res. 14, the One Big Beautiful Bill Act [Letter to Hon. Brendan F. Boyle]. https://tinyurl.com/4bnenxec
Sources
U.S. House of Representatives. (2025). H.R.1 – One Big Beautiful Bill Act. https://tinyurl.com/3da4zeb3, accessed 5/29/25.
Congressional Budget Office. (2025). Reconciliation Recommendations Of The House Committee On Education And Workforce: Cost estimate as ordered reported on April 29, 2025. https://tinyurl.com/yc4njpfa, accessed 5/29/25.
Congressional Budget Office. (2025). Estimated Budgetary Effects Of A Bill To Provide For Reconciliation Pursuant to title II of H. Con. Res. 14, the One Big Beautiful Bill Act: As ordered reported by the House Committee on the Budget on May 18, 2025. https://tinyurl.com/52wud8cj, accessed 5/26/29.
U.S. Congress Joint Economic Committee – Minority. (2025). State-By-State Data: 13.7 Million People Would Lose Health Insurance From Medicaid, ACA Cuts. https://tinyurl.com/3svycchd, accessed 5/25/25.
Rosiles, M. (2025). Arrington Unveils House Gop Budget Blueprint With Trillions In Spending, Tax Cuts. Lubbock Avalanche-Journal. https://tinyurl.com/ymthadcs, accessed 5/24/25.
Contributors
Lindsey Cormack (Content Lead) is an Associate Professor of Political Science at Stevens Institute of Technology and the Director of the Diplomacy Lab. She received her PhD from New York University. Her research explores congressional communication, civic education, and electoral systems. Lindsey is the creator of DCInbox, a comprehensive digital archive of Congress-to-constituent e-newsletters, and the author of How to Raise a Citizen (And Why It’s Up to You to Do It) and Congress and U.S. Veterans: From the GI Bill to the VA Crisis. Her work has been featured in The New York Times, The Washington Post, Bloomberg Businessweek, Big Think, and more. With a drive for connecting academic insights to real-world challenges, she collaborates with schools, communities, and parent groups to enhance civic participation and understanding.
William Bianco (Research Director) is Professor of Political Science at Indiana University and Founding Director of the Indiana Political Analytics Workshop. He received his PhD from the University of Rochester. His teaching focuses on first-year students and the Introduction to American Government class, emphasizing quantitative literacy. He is the co-author of American Politics Today, an introductory textbook published by W. W. Norton, now in its 8th edition, and authored a second textbook, American Politics: Strategy and Choice. His research program is on American politics, including Trust: Representatives and Constituents and numerous articles. He was also the PI or Co-PI for seven National Science Foundation grants and a current grant from the Russell Sage Foundation on the sources of inequalities in federal COVID assistance programs. His op-eds have been published in The Washington Post, Indianapolis Star, Newsday, and other venues.
