Bitterly divided House passes ‘big, beautiful’ tax bill. Here’s what it means to California
The winners from the tax and budget bill the House passed Thursday morning: Californians’ federal income tax rates and their state and local deduction.
The losers: Consumers who buy electric vehicles and people who rely on Medi-Cal for health coverage.
That’s a quick snapshot of who will benefit and who won’t from what President Donald Trump labeled the “Big, Beautiful” bill that squeezed through a bitterly divided House after an all-night session by a 215-214 vote. All 43 of California’s Democrats opposed the measure, while all nine Republicans were for it.
GOP members from California and other higher-tax states were particularly pleased that the $10,000 limit on state and local tax deductions was raised to $40,000 for qualifying taxpayers.
They liked how current income tax rates would remain intact, the standard deduction would continue to go up, seniors who see an even bigger deduction and qualifying parents could get a bigger tax credit for children.
House Ways and Means Committee Chairman Jason Smith, R-Mo. said that without the bill, the average family faced a $1,700 tax increase next year. The bill, he said, “fulfills President Trump’s mandate to end insane woke ideology, replaces bad tax policy with good tax policy, and delivers for families.”
Rep. Young Kim, R-Anaheim, praised the increase to the state and local tax deduction. She called it “a huge win that allows middle-class families I represent to keep more hard-earned money in their pockets.”
Democrats protest
Democrats warned that the bill was largely a giveaway to the wealthy, a blueprint for hurting society’s already vulnerable people.
Tough new work requirements for Medicaid, as well as other restrictions, would make it more difficult for people to get help from the program, which now is used by 15 million Californians. And tax credits for clean energy items, such as electric vehicles and efficient household products, would end or be diluted.
“Bottom line: this bill is an all-out assault on American families,” said Rep. Doris Matsui, D-Sacramento.
“It’s almost cartoonishly corrupt, until you remember that this is exactly how they want government to work: captured by billionaires and weaponized against the public it’s supposed to serve,” said Rep. Jared Huffman, D-San Rafael.
It’s widely expected that much of this will change as the Senate considers the legislation next month. Lifting the state and local tax deduction is not popular in the Senate, nor are the cuts to Medicaid.
What’s most likely to survive are the tax rates.
They were lowered in the 2017 tax bill, regarded as a signature achievement of President Donald Trump’s first term. The bill also boosted the standard deduction and limited itemized deductions.
Most of those changes expire at the end of this year, but there has been virtually no dissent among Republicans, who control the House and Senate, about keeping them intact.
One of the looming flash points is the cost of the bill. The tax breaks could cost $3.8 trillion over 10 years, according to independent estimates.
“Republicans talk about fiscal responsibility, but their actions tell a different story. Trump’s so-called ‘big, beautiful’ budget would add $4 trillion to the deficit by 2034. While my constituents were sleeping, Republicans jammed their partisan bill in the middle of the night, because they know their policies are wildly unpopular,” said Rep. Jim Costa, D-Fresno..
Tax rates and the wealthy
For Californians and the rest of the country, the bill generally means the more one earns, the more they get a tax break.
About 80% of all households would receive a tax cut next year, according to the nonpartisan Tax Policy Center.
But, it found, more than one-third of the savings would go to households with after-tax incomes of more than $460,000.
Those earning less than $35,000 would see a tax cut of about 1%, or about $160, the center said. Those with incomes between $460,000 and $1.1 million would see a cut of 4.3% to their after-tax income, or about $21,000.
Californians would particularly benefit from the lifting of the state and local tax deduction, or SALT. The deduction was capped at $10,000 per taxpayers in the 2017 bill, a change that had a big effect on higher-tax California.
In Sacramento County, for instance, about one-third of taxpayers deducted an average of $12,000 for the state and local taxes they paid before the change. After the cap was imposed, the percentage who got the break plunged to 13% in 2022.
Just how much Medi-Cal will be impacted is unclear. Much of the savings in Medicaid, the federal-state health care program called Medi-Cal in California, would come from tighter work requirements.
The new law was scheduled to take effect in 2029, but that was moved up two years after a group of staunch conservatives objected to the delay.
KFF, the nonpartisan health research firm, estimated that the House bill’s policies are likely to increase the number of uninsured people in California by 1.4 million, or about 3%.
It noted, though, that it could wind up as low as 1 million or as high as 1.7 million. California would be one of 10 states with that much of an increase.
This story was originally published May 22, 2025 at 7:09 AM with the headline "Bitterly divided House passes ‘big, beautiful’ tax bill. Here’s what it means to California."
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