How the House-Passed Reconciliation Bill Would Negatively Impact Young Children and Their Families

Early Thursday morning, the House of Representatives passed the fiscal year 2025 budget reconciliation bill, known as the One Big Beautiful Bill Act, by a narrow 215-214 vote. The sweeping package, estimated to increase the budget deficit by between $2.3 trillion and $3.1 trillion over the next decade, includes an extension of earlier tax cuts that primarily benefited the wealthy, increased funding for immigration and national defense priorities, and significant cuts to Medicaid and food assistance. Below are the elements of the bill that would have a direct impact on young children and their families.

Taxes

At the heart of the bill are $3.8 trillion in tax cuts, most of which are extensions of the tax cuts enacted during President Trump’s first term in 2017. These tax cuts are due to expire at the end of the year without Congressional action.

The 2017 tax cuts temporarily boosted the maximum child tax credit to $2,000 from $1,000. The House-passed bill makes the $2,000 credit permanent and also raises the maximum credit to $2,500 from 2025 through 2028. After 2028, the maximum credit would drop back down to $2,000 and be indexed to inflation.

While an increase to the child tax credit is a welcome addition to the bill, there are a few things to keep in mind. First, the legislation as written blocks an estimated 4.5 million children from benefiting from the credit because it requires parents claiming the credit to have their own Social Security numbers. That’s a change from current law that only requires a parent’s child to have a Social Security number. Under the proposed law, mixed-status households in which one parent has a Social Security number and the other does not would be ineligible for the credit.

Additionally, approximately 20 million children in working families will receive less than the full $2,500 per child, due in part to the “refundability cap” that limits the portion of the credit that families can receive if it exceeds their income tax liability. The Center on Budget and Policy Priorities notes that, “A single parent with two children earning $16,000 a year as a home health aide would get no additional credit under the bill, while a married couple with two children earning $400,000 a year would receive an extra $1,000.”

In more positive news, the House-passed bill expands the Employer-Provided Child Care Credit (45F) which provides businesses a tax credit for child care expenses provided to employees. The credit hasn’t changed since it was created in 1986, but the current bill permanently increases the credit and indexes the maximum amounts to inflation.

Unfortunately, the House-passed bill fails to strengthen the Child and Dependent Care Tax Credit (CDCTC), the only tax credit specifically designed to help parents with the high cost of child care and one that is ripe for reform. The good news is that the bill will next head to the Senate where a bipartisan group of senators has proposed legislation that would make the CDCTC more generous and partially refundable so that lower-income families could also benefit from the increased credit.

Finally, the bill calls for a new tax-favored savings account for children. Specifically, children born between January 1, 2025 and January 1, 2029 would have $1,000 deposited in a “Trump account” that would be invested in the stock market and could later be used for expenses such as paying for college or purchasing a home. While the idea of “baby bonds” has been championed by Democrats in the past to combat wealth inequality, economists have raised concerns about the usefulness of the “Trump accounts” because they would come with a complex and confusing set of rules.

Medicaid

The recently passed bill makes sweeping changes to Medicaid, the government program that provides health insurance for millions of adults and children with limited incomes, including more than 37 million children and 28 percent of early educators. In all, the bill cuts about $700 billion from Medicaid, the largest cut in the program’s history. Provisions in the bill that require more frequent eligibility redeterminations and increased red tape could force early educators and their children off the program.

The most prominent change proposed in the bill is the imposition of strict work requirements starting by the end of 2026 that would require Medicaid recipients to provide proof of employment in order to receive health coverage. The Congressional Budget Office has estimated that the work requirements and other Medicaid-related changes in the bill could lead to 7.6 million people going uninsured. It’s worth noting that this type of work requirement was implemented in Arkansas in 2018 and led to 18,000 people losing coverage without increasing employment.

Food Assistance

The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, provides food assistance to over 40 million Americans, including about 16 million children. The House-passed bill would cut federal funding for the program by about 30 percent and pass those costs on to individual states while expanding work requirements. States that are unable to make up for the shortfall will have to make cuts to the program or opt out of the program entirely, potentially increasing child poverty and food insecurity.

Next Steps

The House-passed bill is now headed to the Senate where it is expected to undergo significant changes as the chamber works to meet its self-imposed July 4th deadline for passing the bill. And once the bill clears the Senate it will again head to the House floor where lawmakers will have to hash out the differences between the two bills.