The “Big, Beautiful Bill” and the Racial Wealth Gap

By Darius Spearman (africanelements)

Support African Elements at patreon.com/africanelements and hear recent news in a single playlist. Additionally, you can gain early access to ad-free video content.

President Donald Trump signed the “Big, Beautiful Bill” into law on July 4, 2025. He claimed it would boost the economy and create financial security. However, a closer look at this legislation reveals a different story, especially for low-income individuals and racial and ethnic minorities. As a legal scholar who studies how taxes widen the gap in wealth and income between Black and white Americans, I believe this law will make existing wealth inequalities worse. It does this through broad tax cuts that mainly benefit wealthy families. It also forces its costs onto low- and middle-income Americans.

The Widening Chasm of Inequality

The racial wealth gap in the U.S. is stark. Between 2019 and 2022, white families’ median wealth grew to more than $250,000 higher than Black families’ median wealth. This disparity comes from decades of unfair policies in housing, banking, health care, taxes, education, and employment. The new law will deepen these divides. It permanently extends individual tax cuts from Trump’s 2017 tax reform package. Americans have seen for eight years how those changes hurt low-income families. For example, the nonpartisan Congressional Budget Office (CBO) predicted that low-income taxpayers would gain $70 a year from the 2017 tax cuts. However, that figure did not include the effects of getting rid of the individual mandate. This mandate encouraged uninsured people to get health insurance through the federal marketplace. That insurance received heavy subsidies from the federal government. The Republican majority in Congress predicted that losing the mandate would reduce federal spending on health care subsidies. That decrease cost low-income taxpayers over $4,000 per person in lost subsidies. The CBO looked at the net effect of the 2025 bill. It combined the tax changes with cuts to programs like Medicaid and food assistance. It found that the bill will reduce poor families’ ability to get food and health care.

The “Big, Beautiful Bill” is seen as a “horrendous piece of legislation” that will greatly increase the racial wealth gap (inthesetimes.com). Since 1975, there has been an $80 trillion transfer of wealth from the bottom 90% of society to the top 1%. This bill is expected to make this trend worse (observer-reporter.com). The bill also reverses many of the climate change policies put in place by the Biden Administration (observer-reporter.com). The legislation directs about $325 billion to the military and border security. It cuts nearly $1 trillion in funding for Medicaid, a joint state and federal program that covers medical costs for lower-income people (truthout.org). To pay for the tax breaks, the bill ends clean energy tax credits from the Biden administration’s Inflation Reduction Act (IRA). This makes wind and solar projects ineligible unless construction starts before July 2026 or they are in service by 2027 (truthout.org).

Wealth-Building for Whom?

Perhaps the most telling part of the bill is how it twists ideas meant to help low-income families. These ideas are promoted as helping the poor, but they actually help the wealthy instead. A much-publicized feature of the bill is the creation of “Trump Accounts.” This pilot program provides a one-time $1,000 government contribution to a tax-advantaged investment account for children born between 2025 and 2028. While presented as a “baby bonus” to build wealth, the program’s design is deeply flawed and unfair. Although the first $1,000 in the accounts comes from the federal government, the real tax benefits go to wealthy families. They can avoid paying taxes by putting up to $5,000 per year into their children’s accounts. Analysts from the Roosevelt Institute, a progressive economic and social policy think tank, have pointed out that this design primarily benefits affluent families. These families already have extra income to save and can fully use the tax benefits. For low-income families struggling with daily expenses, making additional contributions is not a realistic option. These accounts do not address the main barrier to saving for low-income families, which is a lack of income. They are more likely to widen the wealth gap than to close it.

This unfair approach to wealth-building is also seen in the bill’s renewal and improvement of the New Markets Tax Credit program. The “big, beautiful bill” extended this program to encourage investment in low-income communities. It does this by offering capital gains tax breaks to investors. However, the program subsidizes luxury real estate projects that do little to help existing low-income residents. Instead, they speed up gentrification and displacement. Studies show that there is very little increase in salaries or education in areas with these benefits. The bill also repeals the estate tax. This is described as a huge transfer of wealth to the already rich. It does nothing for the 99.9 percent of Americans, especially Black households, who are less likely to inherit wealth (inthesetimes.com). To pay for these massive tax breaks for the wealthy, the bill slashes programs that working Americans rely on (inthesetimes.com). One particularly harsh cut is reducing benefits for federal employees and gutting civil service protections (inthesetimes.com). These changes threaten one of the most secure ways for Black economic progress, which is government employment. This is done for “savings” of just over $5 billion a year in a bill that will cost trillions (inthesetimes.com).

A Harsh New Rule for Families

The child tax credit is another part of the bill that claims to help the poor and working classes. In reality, it gives more money to the wealthy. A family can earn up to $400,000 and still get the full $2,200 tax credit per child. This reduces their tax liability dollar for dollar. In contrast, a family making $31,500 or less cannot receive a tax credit of more than $1,750 per child. Approximately 17 million children, disproportionately Black and Latino, will not receive anything at all. More significantly, the law tightens eligibility. It requires not only the child but also the taxpayer claiming the credit to have a Social Security number. This requirement will take away the credit from about 4.5 million U.S. citizen children in mixed-status families. These are families where some people are citizens or legal residents and others live in the country without legal permission. In these families, parents may file taxes with an Individual Taxpayer Identification Number but lack a Social Security number, according to an April 2025 study.

The bill includes significant cuts to social safety net programs, especially Medicaid and the Supplemental Nutrition Assistance Program (SNAP). These cuts will disproportionately harm marginalized communities. Democrats objected to these cuts (wisconsinexaminer.com). The bill makes major and unprecedented cuts to Medicaid. These cuts will destabilize state healthcare systems. They will also limit access to providers and care, especially in rural or underserved areas. Furthermore, they will undermine progress in improving health outcomes for children and youth (wordinblack.com). New eligibility barriers and enrollment restrictions are also part of the bill. These include redeterminations every six months and new “community engagement” requirements for Medicaid. These changes will make it harder for families to get and keep coverage (wordinblack.com). Similar issues will cause families to lose their SNAP benefits (wordinblack.com). The Congressional Budget Office (CBO) estimates that 7.8 million individuals will lose their Medicaid coverage and become uninsured (jdsupra.com). Overall, the CBO projects that around 17 million people will lose their health coverage due to the cuts to Medicaid and changes to individual health insurance marketplaces (rollingstone.com).

A Burden on the Poor

Perhaps most striking are the law’s “pay-fors.” These are the provisions designed to offset the cost of the tax cuts. The legislation makes significant changes to Medicaid and the Supplemental Nutrition Assistance Program (SNAP). These programs are lifelines for millions of low-income families. The law imposes new monthly “community engagement” requirements, a form of work requirement, for able-bodied adults to keep Medicaid coverage. Most such adults enrolled in Medicaid already work. Many people who do not work are caring full-time for young children or are too disabled to work. The law also requires states to check eligibility twice a year. Historically, these redeterminations and work requirements have caused eligible people to lose coverage. For SNAP, the bill expands work requirements to some Americans up to 64 years old and parents of older children. It also changes how benefits are calculated in ways that will reduce them. By funding tax cuts for the wealthy while cutting essential services for the poor, the bill formalizes a transfer of resources up the economic ladder. In my view, the “big, beautiful bill” is a missed opportunity. It could have used fiscal policy to address the American wealth and income gap. Instead of investing in programs to help low- and middle-income Americans, the bill uses an unfair approach. This approach will further enrich the wealthy and deepen existing inequalities.

The One Big Beautiful Bill Act (OBBBA) significantly rolls back clean energy tax credits. These credits were meant to encourage growth in the clean energy industry. These tax credits were crucial incentives for energy developers to invest in renewable energy projects (americanprogress.org). By removing these incentives, the OBBBA is expected to lead to the cancellation of many clean energy projects. This will result in less energy available for the grid at a time of rising energy demand (americanprogress.org). The bill’s approach tries to make up for this reduction in electricity supply by promoting more fossil fuel development. This effectively undoes many of the Biden Administration’s climate change policies (americanprogress.org). The bill would make historic cuts to Medicaid and SNAP. It would also end clean energy tax credits that have spurred a manufacturing boom in the United States. All of this is to pay for tax cuts that mainly benefit the wealthiest Americans (americanprogress.org).

The Budget Reconciliation Process

The One Big Beautiful Bill Act (OBBBA) was passed by Congressional Republicans using the budget reconciliation process. This process allows certain legislation related to spending, revenues, and the federal debt limit to pass the Senate with a simple majority vote (51 votes). This is instead of the usual 60-vote threshold required for most legislation. This procedural maneuver is important because it allows a party with a slim majority to make major policy changes without needing support from both parties. This was seen with the OBBBA’s sweeping changes to healthcare and tax systems. On July 3rd, Congressional Republicans passed the OBBBA. This is sweeping, regressive legislation that will overturn the American health care and tax systems (americanprogress.org). The bill’s Medicaid cuts for low-income families and its tax giveaways to the top 1 percent of earners are roughly equal in size. Both are approximately $1 trillion over the next decade (americanprogress.org). The OBBBA will reduce federal Medicaid spending by around $1 trillion from 2025 through 2034 (americanprogress.org).

The One Big Beautiful Bill Act (OBBBA) targets both Medicaid and the Supplemental Nutrition Assistance Program (SNAP) for significant cuts. Medicaid is a joint federal and state program that provides health coverage to millions of low-income Americans. This includes children, pregnant women, seniors, and people with disabilities. SNAP, commonly known as food stamps, provides food assistance to low-income individuals and families. The OBBBA’s changes to these programs, such as new work reporting requirements for Medicaid and limits on state provider taxes, are projected to result in millions losing health insurance and food assistance. This is despite previous promises not to cut Medicaid. Trump has repeatedly promised that he would not cut Medicaid, and this bill breaks that promise in a big way (vox.com). Its new work reporting requirements and other changes, such as a limit to the “provider tax” states may charge, could end up cutting Medicaid spending by as much as 18 percent (vox.com). All together, these provisions would result in 12 million people losing their health insurance, according to the Congressional Budget Office (vox.com). Food stamps are another target (vox.com). The OBBBA will reduce federal Medicaid spending by around $1 trillion from 2025 through 2034. The largest cuts come from Medicaid work reporting requirements ($326 billion), limits on state provider tax arrangements ($191 billion), and restrictions on state-directed Medicaid payments ($149 billion) (americanprogress.org).

Community Engagement Requirements

The One Big Beautiful Bill Act (OBBBA) introduces new “community engagement” requirements for Medicaid. These are essentially work reporting requirements. These requirements state that Medicaid enrollees must participate in certain activities, such as employment, job searching, or community service, to keep their eligibility. The Congressional Budget Office (CBO) estimates that these requirements alone could lead to $326 billion in Medicaid cuts over the next decade (americanprogress.org). These changes are part of broader amendments to federal rules regarding Medicaid and CHIP eligibility and provider participation. They could result in millions losing coverage (everycrsreport.com). Its new work reporting requirements and other changes, such as a limit to the “provider tax” states may charge, could end up cutting Medicaid spending by as much as 18 percent (vox.com). These cuts will have far-reaching consequences for the millions of Medicaid enrollees who lose coverage. They will also affect healthcare providers forced to absorb massive hits to revenues (americanprogress.org).

The One Big Beautiful Bill Act (OBBBA) is projected to result in a significant loss of health insurance coverage and food assistance for millions of Americans. According to the Congressional Budget Office (CBO), the provisions within the bill, including changes to Medicaid and the Affordable Care Act individual insurance marketplaces, would lead to 12 million people losing their health insurance (vox.com). Additionally, the bill’s impact on SNAP could put 11 million people at risk of seeing their benefits cut or eliminated (americanprogress.org). Overall, when combined with changes to the Affordable Care Act, the bill could result in 16 million fewer people with health insurance by 2034 (americanprogress.org). The bill would make historic cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP) (americanprogress.org).

ABOUT THE AUTHOR

Darius Spearman has been a professor of Black Studies at San Diego City College since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.