What's in the tax and spending bill that Trump has signed into law
[July 05, 2025]
By KEVIN FREKING and LISA MASCARO
WASHINGTON (AP) — President Donald Trump on Friday signed the tax and
spending cut bill Republicans muscled through Congress this week,
turning it into law by his own self-imposed Fourth of July deadline.
At nearly 900 pages, the legislation is a sprawling collection of tax
breaks, spending cuts and other Republican priorities, including new
money for national defense and deportations.
Democrats united against the legislation, but were powerless to stop it
as long as Republicans stayed united. The Senate passed the bill
Tuesday, with Vice President JD Vance casting the tiebreaking vote. The
House passed an earlier iteration of the bill in May with just one vote
to spare. It passed the final version Thursday 218-214.
Here's the latest on what's in the bill and when some of its provisions
go into effect.
GOP bill includes reductions for businesses and new tax breaks
Republicans say the bill is crucial because there would be a massive tax
increase after December when tax breaks from Trump's first term expire.
The legislation contains about $4.5 trillion in tax cuts.
The existing tax rates and brackets would become permanent under the
bill, solidifying the tax cuts approved in Trump's first term.
It temporarily would add new tax deductions on tip, overtime and auto
loans. There's also a $6,000 deduction for older adults who earn no more
than $75,000 a year, a nod to his pledge to end taxes on Social Security
benefits.
It would boost the $2,000 child tax credit to $2,200. Millions of
families at lower income levels would not get the full credit.
A cap on state and local deductions, called SALT, would quadruple to
$40,000 for five years. It's a provision important to New York and other
high tax states, though the House wanted it to last for 10 years.
There are scores of business-related tax cuts, including allowing
businesses to immediately write off 100% of the cost of equipment and
research. Proponents say this will boost economic growth.
The wealthiest households would see a $12,000 increase from the
legislation, and the bill would cost the poorest people $1,600 a year,
mainly due to reductions in Medicaid and food aid, according to the
nonpartisan Congressional Budget Office analysis of the House's version.
GOP bill funds the border wall, deportations and a missile shield
The bill would provide some $350 billion for Trump's border and national
security agenda, including for the U.S.-Mexico border wall and for
100,000 migrant detention facility beds, as he aims to fulfill his
promise of the largest mass deportation operation in U.S. history.
Money would go for hiring 10,000 new Immigration and Customs Enforcement
officers, with $10,000 signing bonuses and a surge of Border Patrol
officers, as well. The goal is to deport some 1 million people per year.
To help pay for it, immigrants would face various new fees, including
when seeking asylum protections.
For the Pentagon, the bill would provide billions for ship building,
munitions systems, and quality of life measures for servicemen and
women, as well as $25 billion for the development of the Golden Dome
missile defense system. The Defense Department would have $1 billion for
border security.
Medicaid, SNAP face deep cuts to fund bill's tax breaks and spending
To help partly offset the lost tax revenue and new spending, Republicans
aim to cut back on Medicaid and food assistance for people below the
poverty line.
Republicans argue they are trying to rightsize the safety net programs
for the population they were initially designed to serve, mainly
pregnant women, the disabled and children, and root out what they
describe as waste, fraud and abuse.
The package includes new 80-hour-a-month work requirements for many
adults receiving Medicaid and food stamps, including older people up to
age 65. Parents of children 14 and older would have to meet the
program’s work requirements.
There's also a proposed new $35 co-payment that can be charged to
patients using Medicaid services.
More than 71 million people rely on Medicaid, which expanded under
Obama's Affordable Care Act, and 40 million use the Supplemental
Nutrition Assistance Program. Most already work, according to analysts.
The Congressional Budget Office estimates that 11.8 million more
Americans would become uninsured by 2034 if the bill became law and 3
million more would not qualify for food stamps, also known as SNAP
benefits.
Republicans are looking to have states pick up some of the cost for SNAP
benefits. Currently, the federal government funds all benefit costs.
Under the bill, states beginning in 2028 will be required to contribute
a set percentage of those costs if their payment error rate exceeds 6%.
Payment errors include both underpayments and overpayments.
But the Senate bill temporarily delays the start date of that
cost-sharing for states with the highest SNAP error rates. Alaska has
the highest error rate in the nation at nearly 25%, according to
Department of Agriculture data. Sen. Lisa Murkowski, R-Alaska, had
fought for the exception. She was a decisive vote in getting the bill
through the Senate.
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House Speaker Mike Johnson of La., points to President Donald Trump
after he signed his signature bill of tax breaks and spending cuts
at the White House, Friday, July 4, 2025, in Washington, surrounded
by members of Congress. (AP Photo/Evan Vucci)
The ‘big beautiful’ bill slashes clean energy tax credits
Republicans are proposing to dramatically roll back tax breaks
designed to boost clean energy projects fueled by renewable sources
such as energy and wind. The tax breaks were a central component of
President Joe Biden's 2022 landmark bill focused on addressing
climate change and lowering health care costs.
Democratic Oregon Sen. Ron Wyden went so far as to call the GOP
provisions a “death sentence for America’s wind and solar industries
and an inevitable hike in utility bills.”
A tax break for people who buy new or used electric vehicles would
expire on Sept. 30 of this year, instead of at the end of 2032 under
current law.
Meanwhile, a tax credit for the production of critical materials
will be expanded to include metallurgical coal used in steelmaking.
The bill creates ‘Trump Accounts’ — and funds a national hero
garden
A number of extra provisions reflect other GOP priorities.
The bill creates a new children's savings program, called Trump
Accounts, with a potential $1,000 deposit from the Treasury.
The Senate provided $40 million to establish Trump’s long-sought
“National Garden of American Heroes.”
There's a new excise tax on university endowments and a new tax on
remittances, or transfers of money that people in the U.S. send
abroad. The tax is equal to 1% of the transfer.
A $200 tax on gun silencers and short-barreled rifles and shotguns
was eliminated.
One provision bars for one year Medicaid payments to family planning
providers that provide abortions, namely Planned Parenthood.
Another section expands the Radiation Exposure Compensation Act, a
hard-fought provision from GOP Sen. Josh Hawley of Missouri, for
those impacted by nuclear development and testing.
Billions would go for the Artemis moon mission and for the
exploration of Mars, while $88 million is earmarked for a pandemic
response accountability committee.
Additionally, a provision would increase the nation's debt limit, by
$5 trillion, to allow continued borrowing to pay already accrued
bills.
State AI regulations cut from bill after a GOP uproar
The Senate overwhelmingly revolted against a proposal meant to deter
states from regulating artificial intelligence. Republican governors
across the country asked for the moratorium to be removed and the
Senate voted to do so with a resounding 99-1 vote.
A provision was thrown in at the final hours that will provide $10
billion annually to rural hospitals for five years, or $50 billion
in total. The Senate bill had originally provided $25 billion for
the program, but that number was upped to win over holdout GOP
senators and a coalition of House Republicans warning that reduced
Medicaid provider taxes would hurt rural hospitals.
The amended bill also stripped out a new tax on wind and solar
projects that use a certain percentage of components from China.
Final price tag: GOP bill could add $3.3 trillion to deficit
Altogether, the Congressional Budget Office projects that the bill
would increase federal deficits over the next 10 years by nearly
$3.3 trillion from 2025 to 2034.
Or not, depending on how one does the math.
Senate Republicans are proposing a unique strategy of not counting
the existing tax breaks as a new cost because those breaks are
already “current policy.” Republican senators say the Senate Budget
Committee chairman has the authority to set the baseline for the
preferred approach.
Under the alternative Senate GOP view, the bill would reduce
deficits by almost half a trillion dollars over the coming decade,
the CBO said.
Democrats say this is “magic math” that obscures the true costs of
the tax breaks. Some nonpartisan groups worried about the country's
fiscal trajectory are siding with Democrats in that regard. The
Committee for a Responsible Federal Budget says Senate Republicans
were employing an “accounting gimmick that would make Enron
executives blush.”
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