Fast forward to today and the federal government has responded in kind with a historic legislative overhaul. Over 40% of new budget plan goes to more military and immigration enforcement—taking money away from education and social programs. The administration’s combined $1.7 trillion budget focuses on addressing multiple challenges across the economy. Yet the high-profile bill has generated an equally intense battle over the winners and losers among various stakeholders. Perhaps the biggest change is a $349 billion reduction in federal education funding. They feature extreme tax increases on big private universities and elimination of tax credits for residential solar and battery storage by 2025.
The climate implications of the budget go far beyond education and renewable energy. In particular, it jacks up military appropriations by 13 percent. Beyond that, it provides massive increases for immigration enforcement and changes numerous tax structures that would harm individual and corporate taxpayers alike. Only time will tell. In a nation still trying to understand the implications of all these changes, this new legislation’s ramifications will likely reverberate for years to come.
Education Funding Cuts
Of these changes the most glaring is the $349 billion deficit in future education funding. This shameful cut will hurt public elementary and secondary schools, as well as public colleges and universities nationwide. Unsurprisingly, advocates for education are up in arms. They’re worried that this cut would lead to increased class sizes, decreased student resources and less teacher support.
Educational institutions are already under significant financial pressure. This deep cut should alarm every American who cares about the long-term quality of education. As many education and economic development experts will tell you, an educational pipeline is key to the prosperity of our economy and our society. Critics of the budget are calling for a reversal of these cuts. They caution that low-income students may be the hardest hit.
On top of the funding cuts, big private universities find themselves subjected to a huge new tax increase. The tax on private college endowment investment income will increase from 1.4% to 21%. This change is expected to affect how these institutions manage their endowments and could lead to higher tuition fees for students as universities seek to offset the increased tax burden.
Tax Changes and Their Implications
The new budget represents a momentous shift in the tax landscape. Perhaps most strikingly, it makes permanent the Trump-era tax cuts that were scheduled to sunset at the end of 2025. To say that this extension has created a firestorm of mixed reactions would be an understatement. Supporters promise it will catalyze significant economic growth, while opponents decry that it primarily benefits people with high incomes. In concert with these cuts, the budget makes a dramatic expansion of the State and Local Tax (SALT) deduction. It increases the thresholds from $10,000 to $40,000 for individuals and couples. This deduction is allowed to begin phasing out for single filers making more than $500,000. Wealthier taxpayers should stand to benefit very little from it as a result.
Though it doesn’t explicitly mention EVs, the new legislation establishes a new annual $250 fee on EV owners. Moreover, it will remove the current $7,500 federal EV tax credit permanently after 2025. This two-pronged approach seeks to raise funds while increasing EV penetration. Critics are concerned it could dissuade consumers from putting their money toward electric vehicles, particularly as more Americans become attuned to climate issues.
These work requirements apply to Medicaid eligibility, and the budget moves up the implementation of these measures, which are set to go into effect in December 2026. These changes are part of a broader conservative push to reverse progressive reforms of social safety net programs. They raise the hackles of advocates for low-income families, who fear that access to critical health services is threatened.
Military and Immigration Funding Increases
Unlike the slashing of education and social programs to pay for an increased $150 billion military budget. We believe this increase must be used to solve urgent national security concerns and improve military readiness. Supporters claim that having a strong defense budget is more important now than ever with the ongoing geopolitical strife. Opponents counter that these massive military expenditures should not be prioritized when domestic programs are experiencing major funding shortfalls.
Immigration enforcement receives the largest increase! Another $175 billion would continue the current administration’s border wall funding and expanded deportation operations. This marked increase confirms the administration’s priorities toward harsher immigration enforcement as discussions about border security and comprehensive immigration reform continue. Critics point out that these funds would be better spent addressing humanitarian needs or strengthening social service infrastructure.
At the same time, we can expect huge reductions to farm support programs of $238 billion. These cuts are aimed specifically at rural subsidies, commodity support and farm development assistance programs. Underfunded and overburdened farmers and rural communities are facing deep concerns over their long term survival. Stakeholders are concerned that lowering this support would put food security and rural economies at risk.