From the Las Vegas Review Journal
Trump has called the bill “the biggest tax cut in the history of our country … bigger than any Ronald Reagan tax cut”. The centrepiece of the bill will extend Trump’s 2017 cuts, which include a reduction in the marginal rate of income tax. These were the signature achievements of Trump’s first term and were due to expire at the end of the year. Retaining them will cost about $4.5 trillion.
They also include Trump’s promise from the election campaign to abolish taxes on tips and overtime. The abolition is due to last until 2028. According to an analysis by the nonpartisan Joint Committee on Taxation, tax-free tips would reduce federal revenue by $31 billion between the 2026 and 2029 fiscal years, while tax-free overtime would reduce federal revenue by $90 billion during the same period.
Federal Taxes on Social Security
A portion of the federal taxes that you pay on your Social Security goes back into the trust funds of Social Security and Medicare Hospital Insurance. This policy was enacted with the 1983 Amendments to the Social Security Act as a way to strengthen the financial solvency of social security.
The “enhanced deduction” for taxpayers 65 and older eliminates federal income taxes for most beneficiaries.” It is implied that two provisions of the budget bill reduce taxes for seniors, when in fact there’s only one. The deduction applies to all income, not just Social Security. Like so much else in the budget bill, the tax break as it might apply to Social Security benefits goes mostly to wealthier taxpayers. That’s because of the way Social Security benefits are taxed.
Moreover, as labor economist Teresa Ghilarducci observed at Forbes, “The bill doesn’t do anything directly to Social Security.” A provision that would have specifically exempted Social Security benefits from taxes was dropped from the bill when it came under consideration by the Senate.
The claim that beneficiaries will “no longer pay federal income taxes on their benefits” is also inaccurate: The enhanced deduction — $6,000 for single filers, $12,000 for couples — will expire in 2028, unless it’s extended by Congress. It’s also limited by income: The full deduction is available only to singles up to $75,000 in income, $150,000 for couples. The deduction phases out above those levels, zeroing out for singles with $175,000 in income or higher, $250,000 for couples.
The reduction of taxes on benefits will weaken, not protect, Social Security (and Medicare too). The reason is that about 60% of the revenues generated by those taxes is credited to the Social Security trust funds. The rest goes to Medicare.
In 2025, that sum is expected to come to about $60 billion for Social Security, or more than 4% of the program’s overall income, and $40.7 billion for Medicare, or nearly 9% of the funding for Medicare Part A, which covers hospital services. The budget bill has no provision for replacing that money.
Subtitle C–Increase in Debt Limit (HR 1 Sect C of The Big Ugly Bill)
SEC. 72001. MODIFICATION OF LIMITATION ON THE PUBLIC DEBT.
The limitation under section 3101(b) of title 31, United States
Code, as most recently increased by section 401(b) of Public Law 118-5
(31 U.S.C. 3101 note), is increased by $5,000,000,000,000.
What it Means per Gemini (AI)
1. Affect on the Deficit:
- Increased Deficits: The Congressional Budget Office (CBO) estimates that HR1, the “One Big Beautiful Bill Act,” will increase deficits by approximately $2.8 trillion over the 2025-2034 period, and potentially up to $3.4 trillion or more when factoring in additional debt service costs and various provisions. This is largely driven by a reduction in revenues ($3.7 trillion) despite some reductions in outlays ($1.3 trillion) over the same period.
- New Spending and Tax Cuts: The bill includes various tax cuts and new spending initiatives. While it also incorporates some offsets, the net effect is a significant increase in the primary deficit.
- Debt Service Costs: A substantial portion of the increased deficit will come from higher debt-service costs, estimated to be hundreds of billions of dollars over the next decade, as the government needs to borrow more and potentially at higher interest rates.
2. Affect on the National Debt:
- Higher National Debt: The $5 trillion increase in the debt limit directly allows the federal government to borrow this additional amount. This means the national debt will increase by at least the amount of the increased deficits, pushing it further upward.
- Debt-to-GDP Ratio: The CBO projects that enacting HR1 would increase debt held by the public at the end of 2034 to 123.8% or 124% of Gross Domestic Product (GDP), up from their January 2025 baseline projection of 117.1% of GDP. This indicates a growing burden of debt relative to the size of the economy.
- No New Spending Authority (but enables existing obligations): It’s crucial to understand that raising the debt limit doesn’t authorize new spending. Instead, it allows the government to pay for existing legal obligations that Congresses and presidents have already made. However, HR1 itself contains significant new spending and tax cut provisions that will lead to higher borrowing.
In summary:
The $5 trillion increase in the debt limit within HR1, signed on July 4, 2025, has a clear and substantial impact:
- It will significantly increase the federal deficit over the next decade due to a combination of tax cuts and new spending.
- This will directly lead to a higher national debt, both in absolute terms and as a percentage of GDP.
Critics argue that this bill represents a “striking display of fiscal hypocrisy” as it increases the debt ceiling while simultaneously creating new deficits, potentially delaying a much-needed debate over unsustainable government spending. Supporters, however, may view it as necessary to avoid a potentially catastrophic default and to implement desired policy changes.
Tax Provisions in H.R. 1, the One Big Beautiful Bill Act: House-Passed Version | Congress.gov
President Trump signs H.R. 1, the “One Big Beautiful Bill Act” – PwC
U.S. Department of the Treasury (.gov)
Debt Limit | U.S. Department of the Treasury
H.R. 1 Passes: A Mixed Bag for Federal Employees and the Economy – AInvest