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.
“Cuts to lifesaving safety net programs like Medicaid and SNAP are not only a direct assault on the people who rely on them, but also on our values and our principles,” said New York Lt. Governor Antonio Delgado (D). “We cannot standby silently, we must fight back.
To examine the potential real-world impact, Yale’s Budget Lab modeled four policy changes that align with the resolution’s goals:
• A 30% across-the-board cut in SNAP funding.
• A 15% 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% of earners by 5% in the calendar year 2026. Households in the middle would see a modest 0.6% gain. However, the top 5% of earners would experience a 3% increase in their after-tax-and-transfer income.
Moreover, the analysis concluded that more than 100% of the net fiscal benefit from these changes would go to households in the top 20% 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.
Cuts Could Exacerbate Matters for Black, Low-Income D.C. Residents
A separate study last year revealed that Black and low-income communities in the District are already faced with challenges, where 21.8% of residents live below 200% of the federal poverty level.
As of June 2024, 260,218 D.C. residents relied on Medicaid and CHIP for health and long-term care.
Proposed cuts could eliminate coverage for many, exacerbating health disparities.
Medicaid spending in the District totaled $4.2 billion in fiscal year 2022, with the federal government covering 78.2%. Since the end of the COVID-19 continuous enrollment provision in March 2023, D.C. has disenrolled 67,619 people from Medicaid.
Also, in 2022, over 140,000 D.C. residents received SNAP benefits. Cuts to SNAP would hit Black communities hardest, as they disproportionately rely on food assistance programs.
In 2024, 11,910 D.C. residents enrolled in the Affordable Care Act marketplace plans, with 22% receiving premium tax credits. Eliminating these credits would increase healthcare costs for thousands of small business owners and self-employed workers.
Households earning $743,000 or more would receive an average $62,000 tax cut, surpassing the annual incomes of many D.C. Medicaid recipients.
“This budget prioritizes billionaires over working families,” said Rep. Ilhan Omar (D-Minn.).
Medicare beneficiaries in D.C. could also face challenges. In 2024, 95,577 residents were enrolled in Medicare, with 71,021 in Part D coverage. Recent measures capped monthly insulin costs at $35, benefiting nearly 4,855 D.C. users in 2020. These protections could be undermined under the new budget.
While the House plan includes a $4 trillion debt ceiling increase, it projects to reach thelimit by November 2026. With essential programs for health, food, and education at risk, D.C. residents —particularly marginalized communities — face heightened economic insecurity under the proposed cuts.
“These results indicate a shift in resources away from low-income tax units toward those with higher incomes,” according to the the Budget Lab report. “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, 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.
