Seven ways Trump’s tax and spending bill could affect Californians

May 23, 2025

It’s more than 1,000 pages, and, as it stands now, the recently House-passed bill with massive tax breaks and spending cuts has significant implications for California voters.

The House of Representatives early Thursday morning — after last-minute dealmaking by leadership — very narrowly passed what’s been dubbed the “Big, Beautiful Bill” that advances President Donald Trump’s agenda.

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No Democrats voted for the bill, and only two Republicans broke to vote no: Reps. Warren Davidson of Ohio and Thomas Massie of Kentucky. That means California lawmakers split along party lines in the 215-214 vote.

The massive package is a continuation of the 2017 Tax Cuts and Jobs Act provisions spearheaded during the first Trump administration. But it also makes vast changes to Medicaid — instituting a work requirement for recipients of the health insurance program for low-income people — and ups the cap on how much of a deduction taxpayers can claim to offset high state and local tax obligations.

“This bill represents an historic opportunity to deliver economic freedom for working families, farmers and small businesses,” said Rep. Jason Smith, a Missouri Republican who chairs the Ways and Means Committee, instrumental in putting together the budget bill.

Smith’s office said the average California taxpayer would see a 20% tax hike if those provisions from 2017 were not continued.

Yet, Democrats warn the package would be detrimental to working-class and lower-income families. Rep. Dave Min, D-Irvine, called it “the most immoral budget of our time” after the vote, and Rep. Sydney Kamlager-Dove, D-Los Angeles, called it the “Big Backstabbing Bill.”

Still, everything in the House-passed package isn’t set in stone. It still needs to go through the U.S. Senate — where there have been rumblings of concerns among some GOP members about Medicaid cuts.

For now, here’s a look at what the spending package could mean for Californians, from changes to certain credits to health care implications and more.

SALT cap increases

Perhaps one of the most closely watched “will they, won’t they” provisions of the spending bill was the cap on how much taxpayers can deduct on their federal taxes to offset high local and state taxes, called SALT.

Republicans from high-tax states, including California, were at loggerheads with House leadership for much of the negotiations, outright promising to vote no on the bill unless the cap — levied in 2017 at $10,000 — was significantly increased.

But a late-in-the-game proposal got those Republicans, including Rep. Young Kim, R-Anaheim Hills, on board.

The bill ups the cap to $40,000 for people with incomes up to $500,000 and is adjusted 1% for inflation annually.

When the cap was placed on SALT in 2017, there was no one in Congress who could explain how it would adversely affect those who live in states with high costs of living — California, New Jersey and New York — said Kim. She said she made the case to House leadership and other colleagues that even though the cap may seem high for their districts, in hers, it would benefit middle-income families, like firefighters and teachers.

“To put it simply, I needed to keep my promise, and that’s why it was so important to me to not cave in and continue to fight for what will bring the most help and relief for my district,” Kim said after Thursday’s vote. “I’m really happy I was able to deliver for my constituents so they can keep more of their hard-earned money.”

Medicaid work requirements

Included in the bill is one of the strictest Medicaid work requirements proposed by Congress. Called “community engagement requirements,” the bill mandates that able-bodied adults without dependents work, complete community service or participate in a work program for at least 80 hours a month or be enrolled in an educational program.

Those who are under 19 years old, pregnant or receiving postpartum medical care are exempt from the work requirements.

The Congressional Budget Office, a nonpartisan entity that provides analysis for Congress, estimated the work requirements would reduce federal spending by $280 billion over a decade. But it also found that the number of people with health care would be reduced by about 8.6 million.

Health policy research nonprofit KFF estimated, based on an early draft of the bill, that California could see between 1.2 million and 2 million in enrollment losses to Medi-Cal, California’s Medicaid program.

Democrats have strongly decried the Medicaid changes, including Rep. Mike Levin, D-San Juan Capistrano, who called the work requirements “harsh.”

“President Trump and Speaker Johnson are once again putting billionaire donors ahead of everyday Americans — at the direct expense of children, seniors, veterans and working families,” said Levin.

But Kim called those arguments “disingenuous,” saying the changes to Medicaid will ultimately strengthen the program for those who need it the most.

Aside from work requirements, she also pointed to the bill’s plan to end duplicative payments to patients who sign up for Medicaid in multiple states and attempt to limit the program only to citizens or those with legal status.

Gov. Gavin Newsom recently proposed rolling back access to Medi-Cal for low-income immigrants without legal status — a year after they were granted such. Newsom recently suggested no longer accepting new enrollees without legal status into the program as a way to alleviate the state’s budget woes.

The federal bill also blocks Medicaid funds for Planned Parenthood, which provides abortion services along with other health care needs. Federal money already cannot pay for abortion services, but state Medicaid funds in some states, including California, do.

Planned Parenthood of Orange and San Bernardino Counties said the cuts would “be devastating to the hundreds of thousands of low-income Californians who rely on Planned Parenthood for life-saving cancer screening, birth control, STI testing and treatment, and other vital health care services.”

“If Planned Parenthood is ‘defunded,’ then cancers would go undetected, STIs go untreated, birth control would be harder to get and the public health infrastructure of communities will break down,” said Nichole Ramirez, senior vice president of communications and donor relations at PPOSBC.

According to the Associated Press, some 200 Planned Parenthood centers are at risk of closing should the cuts remain. But Ramirez said there are no plans at the moment to close any PPOSBC local health centers.

Estate tax exemption continues

The bill increases the estate tax exemption threshold to $15 million in 2026, adjusted for inflation thereafter.

Called the “death tax” by Republicans, this is the amount of an estate that would trigger a federal tax when the property is transferred upon a death. It generally impacts the wealthiest of estates, but Republicans have said it has also burdened family farms that are often struggling.

Savings accounts for new parents

Parents or guardians who open new so-called “Trump” savings accounts for their kids with birthdates between Jan. 1, 2024, and Dec. 31, 2028, will receive $1,000 from the federal government to put into the account. Families can deposit up to $5,000 a year into the tax-deferred account.

At age 18, the account holder may access up to half of the money in the account to pay for higher education, training or first-time home purchases. The account holder would then have access to the rest of the money when they reach age 30.

This bill was initially called the “MAGA” accounts — a play on Trump’s “Make America Great Again” motto that stood for “Money Account for Growth and Advancement” — but was changed in a Wednesday amendment to the “Trump” accounts.

States on the hook more for SNAP

Federal food aid through the Supplemental Nutrition and Assistance Program would decrease by about $267 billion over a decade.

Currently, the federal government pays all the benefits, and states chip in half for administrative costs. But under the bill, states would be responsible for 5% of benefit costs, starting in fiscal year 2028, and 75% of administrative costs.

SNAP eligibility would also change, requiring able-bodied adults without dependents to log 80 hours of work or “community engagement” per month until age 64 — 10 years longer than under current rules.

In addition, parents who are now exempt from work requirements until their children are 18 may be affected: Proposed changes call for exempting only those caring for a dependent child under age 7.

According to the California Budget & Policy Center, changes to SNAP could force California to reduce the amount of food aid going to individual recipients or reduce the number of recipients.

“Regardless of the magnitude of the cost-sharing proposal, Californians who rely on CalFresh to afford basic food needs are at risk of facing reduced benefits or exclusion from the program entirely, which could lead to increased food insecurity and poverty at a time when so many Californians are already struggling with the high costs of living,” the center said in a report last month.

Energy tax credits phase out

While California has a reputation for aggressively pursuing clean energy, Texas and Oklahoma lead the country in wind energy generation. Above, the San Gorgonio Pass wind farm between the 10 Freeway and Highway 111 near Palm Springs on Friday, Aug. 7, 2020. (Photo by Terry Pierson, The Press-Enterprise/SCNG)

Several clean energy tax credits are set to end earlier than expected under the current version of this bill. That includes the termination of credits related to energy-efficient homes, clean electricity production and electric vehicles and phasing out a credit for wind and solar storage.

Many of the energy tax credits had been around for decades and were expanded during the Biden administration, according to CNBC.

The bill “endangers our clean air and water, will devastate our growing economy and the jobs that are powering it, and open up our nation’s precious lands and waters to even more reckless oil and gas drilling,” said Kim Orbe, the acting director of the Sierra Club Angeles chapter, which covers Los Angeles and Orange counties.

Child tax credit increases and adds requirement

The child tax credit, which doubled from $1,000 to $2,000 during Trump’s first administration, would remain — and even increase temporarily to $2,500 through 2028 before dropping back down to $2,000, though it would then be adjusted to reflect inflation.

Smith, the chair of the Ways and Means Committee, said the bill locks in the child tax credit for more than 40 million families and will provide additional tax relief.

But some Democrats warned that rule changes would negatively impact the families of millions of children.

Under the House bill, a parent or both parents, if filing taxes jointly, would need to have a Social Security number to claim the credit — a new requirement targeting undocumented immigrants.

“This bill assaults those seeking the ‘American dream’ by stealing tax benefits and services from working people who are paying taxes. It would deny the child (tax) credit to 2 million children who live in the United States,” Rep. Linda Sánchez, D-Whittier, said on the House floor earlier this week.