Senate Budget Bill Proposes Significant Tax Changes Impacting Low and High Income

Washington, D.C. — Changes to taxes and spending in the Senate budget reconciliation bill could reduce income by 2.9 percent, about $700, for the bottom quintile of earners while increasing it by 1.9 percent, around $30,000, for the top one percent. This bill aligns closely with a prior version passed by the House of Representatives, with deeper cuts to Medicaid somewhat balanced by smaller cuts to the Supplemental Nutrition Assistance Program (SNAP).

The proposed Senate bill would create a larger income decrease for the poorest Americans than the House version, where a $600 decrease represented a 2.5 percent decline. For those in the upper income brackets, the Senate’s projected increase averages $5,700, compared to $6,500 in the House version.

Policymakers are contemplating financing parts of this new fiscal package through tariffs. Analysis has shown that the combination of tariff adjustments along with the proposed changes in taxes and spending would lead to an even more regressive financial impact than previously indicated.

Details of the bill have been visually represented in various tables and figures, which demonstrate average annual changes in after-tax and transfer income spanning the 2026-2034 period. The overall implications of these proposed changes appear regressive, transferring resources away from lower income households toward higher income units.

Tax units among the lowest income earners in the distribution are projected to experience a significant income reduction, while those in the top 20 percent may enjoy a slight increase. The Senate version includes an amendment from Senator Rick Scott of Florida, projected to cut Federal Medicaid spending significantly over multiple years, increasing pressure on states to cover costs.

Initial analyses indicate that the reconciliation efforts are still ongoing, with many critical amendments and provisions likely to surface in the following days. Indeed, the ultimate fate of the Senate bill remains uncertain as it faces both internal party concerns and bipartisan scrutiny.