Taxes, Deficits & Fiscal Policy

Updated July 2026 22 primary sources

A sweeping 2025 tax law has reshaped the fiscal debate amid record deficits and a credit downgrade.

Trump signed the "One Big Beautiful Bill Act" (OBBBA) on July 4, 2025 — It permanently extends most 2017 TCJA provisions, adds temporary deductions for tips, overtime, seniors, and car loan interest, and raises the SALT cap to $40,000, phasing down for high earners and reverting to $10,000 in 2030 (Bipartisan Policy Center; Tax Foundation via National Taxpayers Union).
CBO projects the law adds trillions to deficits — Roughly $3.4–$4.1 trillion over 2025–2034 including debt-service costs, rising toward $5 trillion if temporary provisions are extended (CBO; Brookings).
Moody's stripped the U.S. of its last AAA credit rating days before passage — The May 2025 downgrade to Aa1 cited "large fiscal deficits" and rising interest costs, following similar downgrades by S&P in 2011 and Fitch in 2023 (Reuters).
The national debt and deficits keep climbing — Debt topped $38 trillion by early 2026, and CBO's February 2026 baseline projects annual deficits growing from under $2 trillion to over $3 trillion by 2036, with interest costs alone exceeding $1 trillion in fiscal 2026 (Bipartisan Policy Center; CRFB).
The law has fueled intense debate over who benefits and whether the fiscal trajectory is sustainable — A dispute running through 2025–2026.

The Two Positions

Where each side stands

Every point below is sourced to a real organization, official, or news report — click through to read it in full context.

Conservative

The OBBBA prevented the largest tax increase in American history

Republicans argue that without the bill, the expiration of the 2017 TCJA would have triggered a roughly $4 trillion, economy-wide tax hike on virtually all Americans starting January 1, 2026 (Club for Growth).

Permanent tax certainty will drive long-term investment and growth

The Heritage Foundation argues that ending decades of "temporary" tax policy gives businesses and households certainty, crediting the bill with resolving "90% of the unresolved parts of the tax code" and enabling permanent full expensing for factories and R&D (Heritage Foundation).

The average American taxpayer will see real, measurable savings

Heritage Foundation modeling finds the average taxpayer in the median state will save about $2,417 per year between 2026 and 2034 from the combination of new cuts and the avoided TCJA expiration (Heritage Foundation).

Full expensing and pro-growth provisions will meaningfully lift GDP

The Tax Foundation projects the law's tax provisions will increase long-run GDP by roughly 0.7–1.2%, driven largely by permanent 100% expensing for capital investment, with Americans for Tax Reform's Grover Norquist arguing this "sets us up for growth" and higher wages (Tax Foundation via NTU; YouTube/Norquist interview).

The bill pairs tax relief with real spending discipline and welfare reform

Club for Growth points to roughly $1.1–1.2 trillion in net federal spending cuts, new work requirements for able-bodied Medicaid and SNAP recipients, and the elimination of "Green New Deal" energy subsidies as necessary fiscal reforms that complement the tax cuts (Club for Growth; Heritage Foundation).

Faster GDP growth, not tax hikes, is the right path to shrinking deficits

Treasury Secretary Scott Bessent has repeatedly argued the administration's strategy is to grow the economy faster than the debt grows, targeting a reduction in the deficit-to-GDP ratio by about 100 basis points a year and citing 4% growth in early quarters of Trump's term as evidence the strategy is working (Treasury Department; CNN transcript).

Progressive

The bill is a massive wealth transfer to billionaires and corporations, financed by cuts to health care and food aid

Sen. Bernie Sanders called it "the most dangerous piece of legislation in the modern history of our country," noting the top 1% would receive a $975 billion tax break while the bill strips health coverage from millions (Sen. Bernie Sanders).

Tax cuts are heavily skewed toward the top of the income scale

The Institute on Taxation and Economic Policy calculates the richest 1% will receive about $121 billion in net tax cuts in 2026 alone — more than the entire bottom 60% of taxpayers combined — with the top 20% capturing roughly 69–70% of total benefits (ITEP).

Many low- and middle-income households will see a net tax increase once tariffs and benefit cuts are included

ITEP finds that for a large majority of Americans, tariff-driven cost increases and the expiration of ACA health tax credits more than offset the OBBBA's direct tax cuts, with only the top 5% coming out ahead on net (ITEP).

The law deepens the deficit while gutting the safety net

The Center on Budget and Policy Priorities finds the top 1% receive tax cuts three times the size of those for the bottom 60% combined, while cuts to Medicaid and SNAP roughly offset the tax breaks flowing to very high earners (CBPP via Thomson Reuters).

Billionaire wealth has surged even as ordinary families face higher costs

Americans for Tax Fairness reports U.S. billionaires' collective net worth grew by $1.96 trillion (30.6%) in the 16 months after Trump's reelection, while the bottom 80% of Americans face an average of $793 in higher costs this year from the combined effect of tax and benefit changes plus tariffs (Americans for Tax Fairness).

A wealth tax on the ultra-rich, not more borrowing, should fund public priorities

Sen. Elizabeth Warren and Rep. Pramila Jayapal are pushing the Ultra-Millionaire Tax Act, a 2% annual tax on net worth above $50 million (3% above $1 billion), which they say would raise $6.2 trillion over a decade to fund childcare, housing, and health care without raising taxes on 99.85% of households (Rep. Pramila Jayapal).

Common Ground

Key facts both sides cite

Data and polling that inform the debate — both camps draw on these figures, even when they read them differently.

CBO's projected 10-year deficit impact of the OBBBA — The Congressional Budget Office estimates H.R. 1 will increase primary deficits by roughly $3.4 trillion over 2025–2034, rising to about $4.1 trillion including added debt-service costs — a baseline figure cited by both conservative and progressive commentators, though they draw opposite conclusions from it (CBO).

CBO's distributional analysis of household resources — CBO found that under the bill, households in the lowest income decile would see resources fall by about $1,600 per year (3.9% of income) by 2034, while the highest decile would gain about $12,000 per year (2.3% of income) — a dataset both sides reference to argue for or against the law's fairness (CBO).

Moody's May 2025 downgrade of U.S. credit from Aaa to Aa1 — Both sides cite the downgrade — the last of the three major agencies to strip the U.S. of its top rating — as evidence of fiscal risk, disagreeing chiefly on whether the OBBBA worsens or eventually improves the trajectory Moody's flagged (Reuters).

Pew Research polling on public opinion of the bill — A June 2025 Pew survey found 49% of Americans opposed the bill versus 29% in favor, with 51% expecting it to increase the budget deficit; opinion was sharply partisan, with 71% of Democrats and about a third of Republicans saying it would raise the deficit (Pew Research Center).

Sources

Every citation on this page

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