On the campaign trail in 2024, Trump pledged to improve the economic conditions of the working class. "My plan will massively cut taxes for workers," Trump declared at a campaign stop in Raleigh, North Carolina, on November 5, 2024, the day before the election.

According to Kevin Hassett, the director of the White House National Economic Council, Trump directed Republican lawmakers to "go after the things that are going to help middle-class folks." Trump's economic plans are now codified in the Republican reconciliation bill, which Trump calls his "one big, beautiful bill." Trump is urging Congress to approve it quickly.

Trump's bill does cut taxes. But hose tax cuts are partially offset by steep cuts to healthcare programs and the social safety net. How does the combination of these policies impact the typical worker? The non-partisan Penn Wharton Budget Model provided the first comprehensive analysis last Friday.

The Penn Wharton Budget Model finds that people who make less than $51,000 will see their after-tax income decrease if Trump's "big, beautiful bill" becomes law. Meanwhile, the top 0.1% will see their income increase by hundreds of thousands of dollars.

In 2026, for example, the bottom quintile of earners ($17,000 or less) will see their after-tax income go down by $1,035. Meanwhile, the top 0.1% ($4.3 million or more) will see their after-tax income go up by $389,280.

Over time, the impact on working-class Americans gets worse. By 2030, those in the bottom quintile will see their after-tax income reduced by $1,405.

In essence, Republicans are offsetting huge tax cuts for the wealthy by raising taxes on the poor. For example, the bill makes it harder for many Americans to qualify for tax credits that make health insurance more affordable. The bill also slashes billions from programs that provide transfer income to the working class and poor, including housing subsidies, the Supplemental Nutrition Assistance Program (SNAP), and the Low-Income Home Energy Assistance Program (LIHEAP).

The analysis also highlights that the policies touted by Trump on the campaign trail as a boon to the working class have a relatively small impact. For example, the bill eliminates taxes on tips for many workers until 2028. But many workers in tipped professions already do not earn enough to pay federal income taxes. It also temporarily eliminates taxes on overtime pay. But many workers do not receive overtime pay. For those that do, it is often a small percentage of their income.

While these policies are popular, they are more than offset by the massive cuts to healthcare subsidies and other aspects of the social safety net.

Millions will lose health insurance

The issues with the reconciliation bill go beyond a reduction in income for those who can least afford it. According to an analysis by the Congressional Budget Office (CBO), millions of people will lose their health insurance.

First, the reconciliation bill would codify a recent rule proposed by the Trump administration that would make it harder to receive coverage through the Affordable Care Act (ACA) marketplace. For example, there is currently an annual enrollment period from November 1 to January 15. The bill would shorten the open enrollment period by one month, making it more difficult for people to apply. Those and other changes in the rule would "increase the number of uninsured people by 1.8 million by the year 2034."

Second, the bill attempts to slash spending on Medicaid. It imposes work requirements that will eliminate coverage for people unable to find work or who fail to provide proof of employment. The bill "would require states to deny coverage to people applying for Medicaid if they are not already working (or participating in another qualifying activity) at least 80 hours per month, as well as terminate Medicaid for people already enrolled if they cannot document that they are meeting work requirements." There are exemptions for "caregivers of dependent children, people with disabilities, people who are pregnant" and a few other groups. While this sounds straightforward, in practice, similar policies implemented at the state level have mostly excluded "people who work or should qualify for an exemption but nevertheless would lose coverage due to red tape." It would reduce Medicaid matching funds for any states that cover immigrants with state funds, even immigrants who are in the country legally. And it would impose a variety of new bureaucratic requirements for people to prove that they are eligible for Medicaid. All told, these changes would "increase the number of people without health insurance by at least 7.7 million in 2034."

Finally, as part of the Inflation Reduction Act, the Biden administration extended enhanced premium credits under the ACA that were initially put into place during the pandemic. The reconciliation bill allows those credits to expire at the end of the year, a policy that the CBO projects will result in 4.2 million more uninsured people by 2034.

The exploding deficit

The cuts to health insurance and the social safety net are intended to blunt the fiscal impact of Trump's tax cuts for the wealthy. But the tax cuts are so large that the reconciliation bill would explode the deficit anyway. According to the Committee for a Responsible Federal Budget, the reconciliation bill would "add roughly $3.3 trillion to the debt through Fiscal Year (FY) 2034."

Notably, the Committee for a Responsible Federal Budget does not find that spending cuts by DOGE will reduce future budget deficits because DOGE has not meaningfully reduced federal spending.