Republicans' Budget Package May Worsen Income Inequality, CBO Analysis Reveals

House Speaker Mike Johnson has presented the Republicans' budget package as a promising initiative to create "a new golden age in America," characterized by substantial tax cuts and reduced spending. However, a recent analysis from the nonpartisan Congressional Budget Office (CBO) indicates that the financial implications of the bill may not be as beneficial for everyone, particularly for lower-income Americans.

According to the CBO report released on June 12, the bottom 10% of U.S. households could experience a decrease in their financial resources amounting to approximately $1,600 annually, which represents nearly 4% of their total income. This decline is attributed to the proposed cuts to critical federal programs such as Medicaid and food stamps, coupled with alterations in matching state funds. The report highlights that while the upper 10% of earners might see an increase of around $12,000 per year in government resources, middle-income households are expected to gain only between $500 and $1,000.

The CBO projects an overall increase in household resources from 2026 to 2034, primarily due to decreased federal tax liabilities. Nonetheless, the benefits are not equitably shared; households at the lower end of the income spectrum are projected to face resource reductions, while those in the middle and upper tiers stand to gain. The report reaffirms that the fiscal impact of the budget package will deepen existing income disparities.

Reactions to the analysis have drawn attention from both sides of the political spectrum, with former President Trump urging support for the bill and his spokesperson defending its potential to uplift working-class Americans. In contrast, criticism has emerged from Democrats who argue that the proposed legislation undermines essential social support for low-income families while substantially benefiting the wealthiest households. Representative Brendan Boyle expressed concerns on social media, stating that the bill would rob working-class Americans to enrich billionaires.

Furthermore, the CBO's findings align with earlier assessments from other nonpartisan organizations, such as the Penn Wharton Budget Model. Their projections suggest significant losses for the lowest earning households while indicating that affluent earners could gain substantial tax benefits, with the top 0.1% expected to see after-tax income increases of approximately $389,000. Additionally, an analysis from the Yale Budget Lab echoes these concerns, suggesting that the bottom 10% could see income drops exceeding 6.5%, counterbalanced by a modest 1.5% increase for high-income earners under the proposed Republican budget plan.