On July 4th, on the eve of American Independence Day, Donald Trump gave assent to one of the ambitious legislations of his second term that was passed in the US Congress a day earlier. Popularly called as the ‘Big Beautiful Bill’, the law reiterates the tax and spending measures initiated by the Trump government. The law reflects the promises made by Trump during his election campaign regarding economic prosperity and welfare. However, the apprehension is that the law might lead to fiscal deficit and can be a troublesome factor specifically for the immigrants and diaspora!
Decoding the Details of the Bill and its Domestic Implications
Trump considers the law as a major domestic victory since the beginning of his second-term. The law consolidates Trump’s core agenda and vision for a prosperous America. It aims at spurring military spending and cutting taxes to a large extent, thereby Trump’s ‘Big Beautiful’ law aims at enhancing the national security and economic prosperity. Here is the detailed breakdown of the bill:
Massive Tax Cuts
This is a reiteration of Trump’s 2017 Tax Cuts and Jobs Act, initiated during his first term. The law claims that the income limit for tax deduction has been raised. The State and Local Income Taxes(popularly called as SALT) and the property tax deduction limit has been increased to $40,000 commencing from 2025. There will also be a yearly increase in the income limit for imposing taxes upto 2029 with a scaling of 1% every year.
Cuts in Medical Aid and Other Social Security Measures
Massive reduction in the healthcare coverage and medical aid given to people. Childless adults might have to work 80 hours/month in order to qualify for the medical aid. Other social security schemes are also not completely tax-free. This is contrary to Trump’s election campaign promises.
Blow to Clean Energy Incentives
Clean energy incentives are reduced to 60% in 2026, 20% in 2027 and completely eliminated in 2027. This clause in the law particularly, further intensifies the rift between Trump and Elon Musk, as the latter has ambitious plans to boost the EV(Electric Vehicle) market.
Tax Relief for Workers but Cut in Nutritional Assistance
There are no tax on overtime earnings and other tip wages. Though this is a sigh of relief, on the other hand the law has cut down the assistance given to ‘supplement nutrition programme’, that might affect the food benefits given to approximately 22.3 million families that include children, senior citizen and disabled people.
Raise of the Debt Ceiling
The maximum limit for debt borrowing has been spiked to $5 trillion, which is higher than the limit suggested by the US Congress, which was $ 4 trillion. The law justifies this move by claiming that huge expenses are required to fulfill the previous/older expenses authorised by the Congress.
The ‘Big Beautiful Bill’ of Trump, thus, can be stated as a mixed bag with few privileges and few burden on the US economy. The massive tax cuts and increase of debt ceiling can yield benefits in the short-run by increasing consumer spending, but in the long-run it can lead to high level of fiscal deficit and debt burden. For example, the current US debt burden is $37 trillion and the recent measures can add $4 trillion more to this. This high level of debt burden might demotivate the investors and might draw back their money from the US market in the long-run, leading to destabilised economy and increased unemployment rates due to disinvestment in the economy.
Similarly, cut in medical aid, nutritional assistance and other social security measures can add on to the burden of workers and middle class. Also, deduction of assistance to clean energy initiatives might seem as prospective in the short-run as a cut down on unnecessary or non-profitable spending, but in the long-run it can be cumbersome as the US and the world is witnessing spiking heat waves and other climate catastrophes. Investing in clean energy is thus inevitable, but the Trump government is rarely ambitious on this!
Impact on the Diaspora and the Global Economy
The contribution made by the millions of migrants for the economic growth of America is cherished since decades. However, some of the aspects of the ‘Big Beautiful Bill’, directly impacts the well-being of the wide diaspora network that is settled in America, thus impacting the global economy in terms of inflow of remittances, job opportunities, visa permits etc. Indians, one of the largest diaspora of the United States of America can also be impacted by this law, thus, harming the Indian economic and geopolitical interests to an extent.
Taxes on Remittances
Trump’s ‘Big Beautiful Bill’ has announced 1percent taxes on the remittances that the immigrants send to their home countries. This can make the money sent to home more costly. It can also add burden to the students or early professionals who have settled in America and has to repay their educational loans taken from the home country.
The tax on remittances largely affects the Indian diaspora as well, as India is one of the highest remittance recipient nations. Lakhs of Indian students and early professionals have been working in the USA, who send money home or seek to repay loans. But, the transactions may become quite expensive for them as an impact of the latest law.
Reduction of Healthcare and food aid cuts
The cut in healthcare and other social security schemes can affect millions of working class immigrant families who are predominantly employed in the blue-collar jobs. This might also impact Indian students and other families on work-visas who enjoy government benefits, thus making their life abroad a bit troublesome.
Tougher Immigration Rules
The law also increases the spending on measures to crack down on immigrants and to scale-up the deportation of illegal immigrants. As per the law, the government is hiring nearly 10,000 new immigration officers and plans to deport 1 million people per year. This move can be cumbersome for India and many other countries as they have to deal with bringing back illegal migrants and do massive diplomatic manouvering in order to gain visa-permits.
Affects Students and Researchers
The law aims at cutting funds and endowments to big universities of the USA. This affects the large number of overseas students including those from India who aspire to study, research in the US universities.
These key highlights of Trump’s ‘Big Beautiful Bill’ testify the fact that the bill affects the global economy beyond American borders. Though it empowers the big businesses and investors in the short run due to tax cuts, down the lane it affects the global economy due to spiking national debt and investors’ resistance as they might lose confidence in the American stock and bond markets, one of the most trusted and least volatile markets since decades!
With respect to impact on the Indian economy, the Indian government is capable of navigating all the geo-economic volatilities with its futuristic foreign policies, quintessential diplomatic strengths and long-established bilateral relations with the US and also with the help of well-articulated and timely domestic monetary and fiscal policies. The policies of the Indian government that aided in overcoming the economic hustles posed during covid pandemic, the Russia-Ukraine war, the Israel-Hamas conflict and other global economic jerks is also confident and capable of overcoming the current economic and geopolitical hurdles posed by Trump’s ‘Big Beautiful Bill’!
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