US House Passes Trump’s $3.4 Trillion Tax Bill – What It Means for the American Economy

A major shift in US economic policy came with the approval by the House of Representatives of a bill proposed by former President Donald Trump. With a narrow majority (218 votes in favor and 214 against), the House passed Trump’s $3.4 trillion tax bill, which combines significant tax cuts with deep reductions in social programs, overturning key policies from the Biden administration, particularly in green energy initiatives. The vote took place before the July 4 deadline set by Trump himself. Republicans needed hours of negotiations, intense pressure, and personal interventions from Trump—even on golf courses—to convince hardline and moderate lawmakers from critical states worried about Medicaid cuts. Ultimately, only two Republicans—Thomas Massie (Kentucky) and Brian Fitzpatrick (Pennsylvania)—voted against it alongside Democrats. The bill had previously passed through the Senate with Vice President J.D. Vance casting the tie-breaking vote. The final text includes permanent tax cuts such as extensions of 2017 tax breaks for individuals and small businesses, permanent increases in child tax credits, temporary tax exemptions for donations, overtime, and seniors, and reinstatement of deductions for business investments in research, equipment, and capital spending. At the same time, it includes nearly $1 trillion in cuts to Medicaid, introducing new funding restrictions, work requirements for childless beneficiaries, and cost-sharing obligations. Reductions are also planned for food assistance programs and student loans. In terms of the green transition, most of the tax incentives introduced under Biden have been eliminated, and as of October 1, the $7,500 subsidy for electric vehicle purchases will be discontinued. These tax cuts, which lack full cost estimates, have raised concerns, as the nonpartisan Congressional Budget Office (CBO) projects the package will increase the federal deficit by $3.4 trillion over the next decade. The bill also raises the debt ceiling by $5 trillion, temporarily averting a potential default. Some Republicans from high-tax states like New York, New Jersey, and California secured a temporary increase in the deduction cap for state and local taxes to $40,000 for five years, after which it will revert to the $10,000 limit established under Trump’s 2017 law. Democratic leaders criticized the bill for favoring the wealthy while harming vulnerable populations. House Democratic leader Hakeem Jeffries described it as ‘ending Medicaid as we know it’ and causing hospital and nursing home closures during an eight-hour speech, a record for the House. Polls show that 49% of Americans oppose the bill, while only 29% support it. Trump and his allies hope that tax relief and promised economic growth will win public confidence, but the impact on public finances and society may influence the political climate ahead of the 2026 midterm elections.