Understand House-Passed Budget Deal

What It Means and Its Consequences for You!

Feb 26, 2025

The House narrowly passed a budget resolution (217-215 vote) that lays the groundwork for Trump's economic agenda—including massive tax cuts, deep spending cuts and increases in military and border security funding. The proposal outlines $4.5 trillion in tax cuts and $2 trillion in spending reductions over the next decade, resulting in a net increase of $2.5 trillion to the federal deficit over ten years.

But as usual, the devil is in the details. Below are the details. Short and sweet, because I know you don't have much time.

I consider this post a PSA, so I am offering it to everyone, not just paid subscribers. Please consider supporting Life Intelligence. It’s important to stay informed and life-intelligent. And it takes a ton of time to put these posts together. Much appreciated.

If you don’t want to become a paid subscriber but want to tip me for this article, buy me a coffee or two :) https://buymeacoffee.com/lifeintelligence

Key Details of the Budget Plan:

💰 $4.5 Trillion in Tax Cuts

Extends Trump's 2017 tax cuts for individuals and corporations, which were set to expire. A notable aspect of the proposal is the plan to eliminate the carried interest tax loophole, which has historically allowed hedge fund and private equity managers to pay a lower tax rate on certain earnings by reclassifying them as capital gains rather than profit.

The proposed tax reforms are expected to affect taxpayers differently, depending on their income level. According to analyses, the distribution of tax changes would be as follows:

Lowest 20% (<$25,000) +$800 annual tax increase, -4.8% yearly reduction in income.

Middle 20% ($48,600–$86,100) +$1,500 annual tax increase, -2.1% annual reduction in income.

Top 5% (>$307,900), -$7,200 annual tax decrease, +1.3 yearly income % increase.

Top 1% (>$732,800) -$36,300 annual tax decrease, +1.2 % yearly income increase.

Introduces further corporate tax cuts, reducing rates from 21% to 18%.
Includes capital gains tax reductions, benefiting investors and high-income earners. The proposal aims to reduce the capital gains tax rate from the current 20% to 15%, primarily benefiting high-income earners who derive substantial income from investments.

Additionally, the budget plan proposes the elimination of the 3.8% Net Investment Income Tax (NIIT), which currently applies to individuals with high investment income. The NIIT was implemented to fund healthcare initiatives and applies to capital gains, dividends, and other investment income for individuals earning above certain thresholds. Removing this tax would further reduce the tax burden on high-income investors.
Provides estate tax rollbacks, further reducing taxes on inherited wealth.

✂️ $2 Trillion in Spending Cuts Over 10 Years

$1.2 trillion in Medicaid cuts—likely leading to fewer people qualifying for healthcare assistance. This is one of the largest reductions in Medicaid funding in U.S. history and will significantly affect how the program operates.
The proposed cuts primarily come from:
Block grants & spending caps – Instead of covering a set percentage of costs, the federal government would give states a fixed amount (block grants) or limit spending per enrollee (per-capita caps).
Work requirements – More restrictions on eligibility, making it harder for low-income adults to qualify.
Phasing out ACA Medicaid expansion – Rolling back the Affordable Care Act's (ACA) expansion that allowed millions of low-income adults to get coverage.
Cuts to long-term care funding – Medicaid helps fund nursing homes and home care for elderly and disabled Americans—these services would see reduced funding.

The Congressional Budget Office (CBO) estimates that 15–20 million people could lose Medicaid or CHIP coverage over time. States will have to make tough choices. Since Medicaid is a federal-state partnership, states will either have to raise taxes, cut other programs, or reduce Medicaid services to cover the shortfall. Nursing homes & disability services will suffer. Long-term care funding cuts mean fewer beds, longer wait times and higher costs for families. Hospitals and clinics will absorb the impact. More uninsured patients = more unpaid bills, putting financial pressure on healthcare providers, especially rural hospitals.

$500 billion in cuts to SNAP (food stamps)—reducing eligibility for low-income families. The proposed cuts could lead to a decrease in the average daily SNAP benefit, potentially lowering it from approximately $6.20 to $4.80 per person. Estimates suggest that more than 9 million low-income individuals could lose their SNAP benefits.
Elimination of some federal housing and poverty assistance programs. The administration plans to terminate approximately 4,000 positions at HUD, equating to about half of the department's workforce. An anticipated 84% reduction in staff at the Office of Community Planning and Development could hinder disaster recovery efforts and community development initiatives. A proposed 50% staff cut at the Office of Public and Indian Housing will lead to potentially delaying rental assistance and affecting public housing operations. Facing a 44% reduction, the Office of Housing oversees programs for first-time homebuyers and mortgage insurance, essential for affordable housing access. A nearly 77% staff cut in the Office of Fair Housing and Equal Opportunity may impede investigations into housing discrimination, undermining fair housing enforcement.

The reduction in housing assistance and supportive services is likely to result in a rise in homelessness, particularly among vulnerable populations. Cuts to housing programs can lead to broader economic challenges, including decreased property values and increased demand for local social services.

Rollbacks in climate-related funding and cuts to the EPA and Department of Energy.
Significant cuts to foreign aid.

⚔️ Increased Defense and Border Security Spending

$100 billion boost to the Pentagon, reversing previous budget caps, seemingly at odds with the 8% cuts to the Pentagon the Trump administration announced earlier.
$25 billion in direct funding for the border wall and expanded deportation efforts. As of February 26, 2025, 37,660 individuals have been deported. Notably, this monthly deportation rate is lower than the average of 57,000 deportations per month during the final year of former President Joe Biden's administration. Despite the administration's goal of conducting 1,200 to 1,500 ICE arrests per day, actual figures have fallen short, averaging about 800 arrests per day in January and fewer than 600 per day in February.
Increased funding for military recruitment and weapons programs. The budget includes funding for a 4.5% pay raise for all military personnel, along with an extra $2.5 billion designated for a 15% pay increase for junior enlisted servicemembers. To address recruitment challenges, the Army plans to increase its marketing and advertising budget by 10%, reaching $1.1 billion. Additionally, $675 million is allocated for recruitment incentives, such as enlistment bonuses for critical skills and quick-ship contracts. The budget emphasizes investment in advanced weapons systems, including $1.5 billion for the defense of Guam and support for land-based Aegis Ashore facilities in Romania and Poland.

🚀 Fast-Track to Senate Using Reconciliation

The budget plan enables Republicans to pass related tax and spending legislation through reconciliation, avoiding the 60-vote filibuster in the Senate. This means the Senate only needs a simple majority (51 votes) to approve tax cuts and some spending reductions.

Will It Pass the Senate?

The Senate has indicated it wants a "smaller package," meaning the $2 trillion in cuts could be reduced. Moderate Republicans are hesitant about the deep Medicaid cuts. If two GOP Senators vote against it, assuming ALL Democrats are present, it fails.
Democrats will fight it aggressively in the Senate, but with reconciliation in play, they can't filibuster. While reconciliation itself can’t be filibustered, the process of passing the budget resolution can be slowed down. Democrats could use delaying tactics, forcing long debates and amendments to slow the process.
If protests, media scrutiny, or economic concerns turn public opinion against the bill, some Republican Senators may reconsider supporting it.

Big Picture Takeaway

This budget is a huge win for Trump's economic vision, prioritizing tax cuts, defense, and border security over social programs and climate initiatives. However, its extreme spending cuts could hurt millions of low-income Americans, and the deficit could balloon if the tax cuts don't generate enough new revenue.

It's a bold, high-risk economic move—one that rewards the wealthy and defense contractors while making life harder for lower-income Americans. If it passes the Senate, expect major fights over its real-world impact.

It’s important to stay informed because you might be affected.

Was this helpful?
If so, consider becoming a paid subscriber to Life Intelligence. Much appreciated.