President Donald Trump’s sweeping tax overhaul, known as the “Big Beautiful Bill,” is shaking up economic and political landscapes across the United States as 2025 draws to a close. While the administration touts the legislation as a historic boon for American prosperity, the reality on the ground is far more complicated, especially for state governments and working families.
Trump, never shy about self-congratulation, has repeatedly asserted that the nation is experiencing “perhaps the Greatest Economy in the History of our Country.” On Truth Social, he lamented, “When will I get credit for having created, with No Inflation, perhaps the Greatest Economy in the History of our Country?...When will Polls reflect the Greatness of America at this point in time, and how bad it was just one year ago?” According to Trump, prices are coming down, jobs are plentiful, and the country is the envy of the world. Yet, as bls.gov data and independent analysts point out, the picture is not so rosy for many Americans.
Inflation remains stubbornly present. Over the past 12 months, the overall inflation rate hovered at about 2.9%, nearly unchanged from when President Biden left office. The index for all items less food and energy rose by 3%. Housing costs jumped 3.6%, medical care increased 3.3%, and used cars and trucks surged 5.1%. The price of meats, poultry, fish, and eggs rose 5.2%, while electricity and natural gas prices climbed 5.1% and 11.7% respectively. The only real relief? Gasoline prices, which dipped by a modest 0.5%.
While Trump’s personal net worth reportedly soared by $3 billion during his presidency, millions of Americans are feeling squeezed. More than 20 million people who depend on Affordable Care Act (ACA) Marketplace insurance are bracing for premium spikes, as the new law does not extend key tax credit subsidies. According to reporting, approximately 4 million Americans may drop their coverage altogether, a move likely to drive premiums even higher for those who remain.
The Big Beautiful Bill also includes provisions that will remove some people from Medicaid and the Supplemental Nutrition Assistance Program (SNAP) beginning in 2026. Many of those affected are among the working poor, highlighting a growing divide between the administration’s optimism and the daily struggles of ordinary Americans.
The federal government is not immune to belt-tightening either. The chronically understaffed Department of Veterans Affairs plans to slash 35,000 healthcare jobs in 2026, following 30,000 layoffs in fiscal year 2025. These job losses come amid broader employment turbulence. Through November 2025, U.S. employers announced 1,170,821 job cuts—a 54% increase from the same period in 2024. This marks the highest year-to-date level since 2020, when pandemic-driven layoffs peaked. Notably, the Department of Government Operations and Employment (DOGE) was responsible for 293,753 layoffs among federal workers and contractors in 2025, affecting communities where federal jobs have long been a lifeline.
Job creation is also slowing. Planned hires through November 2025 totaled just 497,151, down 35% from 761,954 the previous year. This is the lowest year-to-date hiring figure since 2010. As a result, those lucky enough to have jobs are holding onto them tightly, and new opportunities are increasingly scarce.
For most Americans, the much-touted tax cuts embedded in the Big Beautiful Bill remain elusive. Analysts agree that unless you’re in the top 10% of earners, you’re unlikely to notice a change—except, perhaps, for a reduction in government services. As one commentator put it, “Most Americans are not going to feel the ‘tax cuts’ included in the Big Beautiful Bill, unless they are in the top 10% of income. For most of us, it means that our taxes are staying the same, and we’re getting less in return.”
Meanwhile, the tax overhaul is creating a patchwork of compliance challenges for state governments. The bill, signed by Trump on July 4, 2025, contains about $4.5 trillion in federal tax cuts over the next decade. It creates temporary tax deductions for tips, overtime wages, and loan interest on new vehicles assembled in the U.S. It also boosts deductions for older adults and temporarily raises the cap on state and local tax deductions from $10,000 to $40,000. Businesses are set to benefit from the ability to immediately write off 100% of the cost of equipment and research.
But here’s the rub: each state must decide whether to conform to these federal changes. Forty-one states levy individual income taxes, and forty-four charge corporate income taxes. In states where tax codes automatically mirror federal law, the new breaks take effect unless lawmakers opt out. In others, state legislatures must proactively adopt the changes. This has led to a flurry of legislative debates and tough choices.
Federal Treasury Secretary Scott Bessent has urged states to “immediately conform” to the federal tax cuts, accusing some Democratic-led states of “political obstructionism.” As Bessent argued, “By denying their residents access to these important tax cuts, these governors and legislators are forcing hardworking Americans to shoulder higher state tax burdens, robbing them of the relief they deserve and exacerbating the financial squeeze on low- and middle-income households.” He did not mention, however, that many Republican-led states are also undecided.
So far, only Michigan has opted into the tax breaks for tips and overtime wages, effective in 2026. The state projects the overtime exemption will cost nearly $113 million and the tips exemption about $45 million for the current budget year. To balance the books, Michigan decoupled from five federal corporate tax changes, which would have reduced state revenues by $540 million in 2025. Republican state Rep. Ann Bollin, chair of the Michigan House Appropriations Committee, commented, “The best path forward is to have more money in people’s pockets and have less regulation — and this kind of moved in that direction.”
Other states are taking a more cautious approach. Lawmakers in Delaware, Illinois, Pennsylvania, and Rhode Island have passed measures to block some or all of the corporate tax cuts from taking effect. Illinois estimates that decoupling from these changes will save nearly $250 million, money that Democratic state Sen. Elgie Sims says will help fund schools, healthcare, and other vital services. Illinois Governor JB Pritzker, a vocal critic of Trump’s economic policies, cited budget concerns and increased costs for programs like SNAP as reasons for rejecting some tax cuts. “The decoupling is an effort to try to hold back the onslaught from the federal government to make sure that we can support programs like the one we’re announcing today,” Pritzker told reporters at a December event on homelessness.
Arizona may be among the next states to act, with Democratic Governor Katie Hobbs calling on lawmakers to adopt the tax breaks for tips, overtime, seniors, and vehicle loans. Republican state House leaders have indicated they are ready to pass the tax cuts when the legislative session opens on January 12, 2026.
As the debate continues, states must weigh the immediate appeal of tax relief against the long-term need to fund essential public services. The coming months will reveal whether Trump’s tax cuts truly deliver for the American people—or simply leave them with less in their pockets and fewer services to show for it.