A new analysis from the Tax Foundation warns that President Donald Trump’s One Big Beautiful Bill Act delivers modest economic growth at a steep fiscal cost. This conclusion now directly collides with Washington, D.C.’s budget, as Congress moves to override local tax decisions that city leaders say would drain hundreds of millions of dollars from District coffers.
The nonprofit tax policy organization estimates the sweeping federal law will raise long-run gross domestic product by 0.7% while increasing federal deficits by roughly $4.1 trillion over the next decade once interest costs are included. Those national figures have taken on sharper meaning in the District, where officials say congressional efforts to force D.C. to conform to the federal tax changes could cost the city more than $600 million over five years and destabilize its budget planning.
“This law brings higher economic output, but it also brings significantly higher deficits and debt,” the Tax Foundation wrote in its updated analysis of the legislation, signed by Trump on July 4, 2025.
Last fall, the D.C. Council voted to decouple from several provisions of the federal tax law, choosing not to replicate certain individual and business tax cuts locally. The decision followed warnings from the city’s fiscal officials that automatic conformity would reduce local revenue and complicate tax administration during filing season. Congressional Republicans are now advancing legislation that would nullify that decision, effectively forcing D.C. to adopt the federal provisions it deliberately rejected.
According to analysis cited by the Center on Budget and Policy Priorities, reversing the District’s decoupling would result in approximately $658 million in lost local revenue over five years. D.C. officials had planned to use those funds to expand the District’s Child Tax Credit and Earned Income Tax Credit while stabilizing the city’s overall budget.
Sam Waxman, deputy director of state fiscal policy at the Center on Budget and Policy Priorities, said congressional intervention exploits the District’s unique status.
“When Congress makes these decisions that it uniquely does because of D.C.’s relationship to Congress and because D.C. is not a state, then it really has the potential to throw D.C.’s budget out of balance,” Waxman said.
The Institute on Taxation and Economic Policy warned that congressional action would override decisions made by locally elected officials and disrupt the District’s ability to govern its own tax system. The group said D.C.’s decoupling was expected to preserve roughly $658 million in revenue while directing resources toward low- and middle-income residents.
At the national level, the Tax Foundation’s modeling shows the One Big Beautiful Bill Act permanently extends many provisions of the 2017 Tax Cuts and Jobs Act, including lower individual income tax rates, a larger standard deduction, and expanded child tax credits. It also restores full expenses for research and development and 100 percent bonus depreciation for certain investments.
The foundation reports that while the law lowers marginal tax rates on some work and investment, higher federal borrowing offsets many of the gains. Federal revenue is projected to decline by about $5.2 trillion on a conventional basis between 2025 and 2034, with economic growth offsetting only a portion of that loss.
Those fiscal pressures have direct consequences for D.C., whose budget is more vulnerable to sudden changes in tax law. The District’s chief financial officer warned congressional leaders that if D.C. is forced to reverse course during tax filing season, the city could face cash-flow disruptions of roughly $400 million in fiscal year 2026 due to delayed collections, along with millions more in administrative costs.
As the Senate prepares to consider the legislation affecting the District, policy analysts say the dispute has grown beyond tax mechanics to questions of local control.
“Nullifying D.C.’s tax laws at this point would deliberately upend the District’s ability to govern itself, plan its budget, and administer a working tax system,” the Institute on Taxation and Economic Policy wrote.