A new Congressional Budget Office analysis reveals that recently enacted budget reconciliation legislation will reduce resources for the nation’s poorest families while providing substantial benefits to wealthy households, prompting sharp criticism from Democratic lawmakers.
The CBO report, released Aug. 11, found that households in the lowest income decile will lose approximately $1,200 per year on average between 2026 and 2034 under Public Law 119-21, representing 3.1% of their total income. Meanwhile, households in the highest income decile will gain an average of $13,600 annually, or 2.7% of their income.
The nonpartisan analysis shows the legislation’s effects vary dramatically across income levels:
Low-income households will see their resources decrease primarily due to reductions in Medicaid and Supplemental Nutrition Assistance Program (SNAP) benefits. After the cuts, these families will still receive about $6,000 annually in net transfers after federal taxes.
Middle-income households in the fifth and sixth deciles will see modest increases of $800 and $1,200, respectively, representing less than 1% of their projected income.
Highest-income households will benefit mainly from tax reductions, with their federal tax burden decreasing significantly. Even after the tax cuts, these households will still pay approximately $190,000 per year in net federal taxes.
Sen. Ben Ray Luján (D-N.M.) characterized the findings as confirmation of Democratic warnings about what he termed the “Republican Budget Betrayal.”
“The nonpartisan CBO has confirmed what Senate Democrats have been warning all along: the Republican Budget Betrayal will benefit the country’s most wealthy while leaving the poorest Americans behind,” Luján said in a statement.
The senator noted that he and other Senate Democrats had proposed amendments to protect healthcare and nutrition programs during the reconciliation process, but those proposals were blocked by Republican lawmakers.
Public Law 119-21, enacted July 4, includes several major components:
- Extensions of provisions from the 2017 tax act
- Changes to health insurance subsidies under the Affordable Care Act
- Modifications to student loan programs
- Reductions in federal spending on Medicaid and SNAP benefits
- New work requirements for certain Medicaid recipients
- Changes affecting some immigrant populations’ eligibility for benefits
The CBO estimates the legislation will affect household resources through four main channels, with federal tax changes and cash transfers providing a net increase of $3.3 trillion, while federal and state in-kind transfers will decrease by $900 billion over the analysis period.
The analysis, prepared in response to requests from Democratic congressional leadership, examined the distributional effects of the legislation compared to CBO’s January 2025 baseline projections. The assessment incorporates both direct federal policy changes and anticipated state responses to those changes.
The report notes that different provisions of the legislation will phase in and out over time, meaning the distributional effects will vary throughout the 2026-2034 projection period.
CBO Director Phillip L. Swagel noted in the report that the analysis does not include the effects of additional debt service costs or broader macroeconomic impacts of the legislation.
The CBO has made an interactive tool available on its website, allowing users to explore the distributional effects in greater detail across different years and policy channels.
The full CBO report and supplemental data are available at www.cbo.gov/publication/61367.