From taxes to Medicaid, what Trump’s ‘big, beautiful bill’ would mean for Michigan

• Trump administration touts legislation extending sweeping tax cuts, adding additional breaks for tips, overtime and more
• House-passed plan would also set stricter limits on food assistance and Medicaid, do away with Biden-era clean energy credits
• As written, bill could increase state obligations for healthcare and food assistance, though changes likely in the Senate

In one fell swoop, the Republican-led US House of Representatives this week voted to extend tax cuts, create other tax breaks, scrap Biden-era clean energy credits and cut spending on public assistance programs like Medicaid and food stamps. 

The so-called “big, beautiful bill” is a top priority of President Donald Trump. He and his allies claim the roughly $4 trillion in tax cuts would save the average family of four $1,700.

US Rep. Tom Barrett, a Charlotte Republican who supported the legislation, said the bill would “deliver the largest tax cut in history for the working class and small businesses.” 

While high earners would see a clear benefit from the cuts, significant changes to Medicaid and the Supplemental Nutrition Assistance Program could make the changes a net negative for lower-income individuals and families, analyses by the nonpartisan Congressional Budget Office and other organizations show.

Critics of the plan include Michigan Gov. Gretchen Whitmer, who predicted the plan would “jack up costs on the middle class” and blow a hole in Michigan’s budget, which uses federal funding to provide health care and food assistance to eligible residents. 

“We cannot accept this level of cruelty towards people who need help,” Whitmer said in a statement. 

Michigan's congressional delegation voted on the bill along partisan lines, with all seven Republicans supporting the measure and all six Democrats opposing it. 

The House-passed bill still needs Senate approval before heading to Trump’s desk, and additional changes to the plan could be coming.

Here’s a look at what the current legislation would do, and how it might impact Michigan. 

Big bill, bigger deficit

The federal debt has grown 121% since 2015, and interest payments alone on it cost $881 billion this fiscal year — more than the government spends on veterans or children. By 2034, interest costs could consume 20% of federal revenue, according to a US House analysis.

Since the pandemic, the federal deficit has doubled to nearly $1.8 trillion. 

The House-passed legislation would add to that figure — a Penn Wharton Budget Model analysis released this week estimated the proposed tax cuts would increase the federal deficit by $4.6 trillion over 10 years, increasing the overall debt by 7.2% over the next decade.

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The Trump administration, through its new Department of Government Efficiency, has sought to further trim spending by firing government workers and slashing federal spending for public health, research, criminal justice and the arts, among other things. 

DOGE, led by billionaire business owner and Trump ally Elon Musk, claims it’s saved $170 billion thus far, though those calculations have frequently contained major errors or misleading claims.

Even taken at face value, the department’s cuts would be vastly outpaced by the loss of revenue from the proposed tax breaks. 

Existing tax breaks would stay

The crux of the package is an extension of roughly $4.5 trillion in tax breaks approved in the 2017 Tax Cuts and Jobs Act during Trump’s first term. Absent congressional action, those breaks would expire at the end of the year. 

Extending the existing tax provisions would mean at least 62% of filers would avoid a tax hike in their 2026 filings, according to the Tax Foundation. 

Failure to do so would mean an average tax increase of $2,119 for Michigan residents, according to the foundation’s figures. 

Temporary boost in standard deductions

Under the legislation, individual tax filers would see a temporary $1,000 increase in the standard deduction, bringing the total to $16,000 for individuals and $32,000 for joint filers. 

Other temporary tax cuts include a $500 increase to the child tax credit, raising the maximum amount to $2,500 through 2028 and adjusting for inflation afterward. 

Low- and middle-income seniors would see a maximum $4,000 increase in tax deductions over the same time frame to offset taxes on Social Security benefits.

New tax breaks on tips, overtime, autos

Throughout his 2024 presidential campaign, Trump proposed several additional tax breaks to build off of his first-term cuts, including deductions on overtime pay, tipped wages and interest on car loans. 

Those tax breaks are included in the legislation as currently written, but they would be temporary — the reductions would be available over the next three years. 

Deductions for overtime pay would be available for people making less than $160,000 per year, and the tip tax deduction would apply to people working in tip-heavy workplaces, such as restaurants and bars. 

Up to $10,000 worth of interest on new car loans for US-made vehicles would also be tax deductible under the bill as written, which Trump previously touted as a benefit for Detroit automakers. 

Stricter Medicaid requirements

To offset costs of other cuts, the proposal includes reduced spending on Medicaid, including through work requirements that would begin Dec. 31, 2026. All told, the Congressional Budget Office estimates the changes would net roughly $700 billion in savings for the federal government.

In Michigan, Medicaid provides health insurance to more than 2.6 million people, or 1 in 4 state residents, primarily with lower-than-average incomes.

The federal government spent $584 billion on Medicaid in 2024, up from $52.5 billion in 1991.

Under the GOP plan, able adults without dependents would need to provide proof twice a year of at least 80 hours a month of completing “community engagement requirements,” such as work, education or service to keep their coverage. Medicaid expansion enrollees could also see copays of up to $35. 

Proponents argue the funds would reduce Medicaid fraud and encourage able adults to return to the workforce or engage with their community. 

University of Michigan professors Donald Moynihan and Pamela Herd said in a statement that the requirements as proposed create administrative burdens that could result in otherwise eligible people losing access to health insurance. 

"To be sure, they work — but only if your goal is to reduce access to services, while largely failing to increase labor market participation,” they said. “They are especially damaging to vulnerable populations, such as those who are already in poor health.”

The proposal would also freeze provider taxes that Michigan and other states use to leverage federal funding for Medicaid. A provision to block coverage for undocumented immigrants likely would not impact Michigan, which already limits eligibility to citizens and legal residents. 

States like Michigan, where the vast majority of Medicaid funds come from the federal government, would have to figure out how to reduce services, trim people from the program or backfill the cuts with millions of dollars from other programs — public safety and infrastructure, for example.

“The magnitude is hard to wrap your head around, because we just don't have the resources at the state level to backfill a cut of this nature,” State Budget Director Jen Flood recently told Bridge Michigan. 

SNAP pulled back 

The proposal would also result in an estimated $285.7 billion reduction in federal spending over the next decade for the Supplemental Nutrition Assistance Program (SNAP), the federal food stamp program that supports roughly 1.5 million people in Michigan. 

Changes suggested in the House Republican plan include capping annual increases in benefits, as well as expanding existing work requirements for food assistance to older adults and parents of children over the age of 7. 

States would also have to cover some costs of the program and would have less flexibility to waive certain work requirements. 

A Congressional Budget Office analysis estimated 3.2 million people nationwide in an average month would lose benefits over the next decade under the changes, including roughly 800,000 adults living with children aged 7 or older. 

Scrap EV, clean energy credits

On his first day in office, Trump vowed to end a so-called “electric vehicle mandate” and wind down green energy initiatives backed by former President Joe Biden.

That includes a $7,500 tax credit for consumer purchases of new electric vehicles, which Trump promised to eliminate during Michigan campaign stops. Those tax subsidies would end under the proposed legislation. 

Also on the chopping block: tax credits incentivizing clean energy production from the 2022 Inflation Reduction Act, which coincided with several major federal investments in Michigan projects. 

Trump previously rescinded a Biden order that had established a national goal for 50% of all cars in the US to be zero-emissions by 2030 and directed the Environmental Protection Agency to establish related emissions and fuel economy standards. 

Those rules did not amount to a mandate for electric vehicle production or purchases, though Trump and his allies claimed they did. Revoking the rules could be a lengthy process, but Trump’s order made clear his administration intends to do so. 

The changes could have a significant impact on Michigan automakers, which have already committed billions of dollars to transition to EVs and build batteries.