The ink may be dry on the One Big Beautiful Bill Act, but the aftershocks are rippling through statehouses and hospital corridors across America. As the sweeping federal law—signed earlier this year—extends the tax cuts first introduced during the Trump administration in 2017, it also slashes spending on federal programs like Medicaid. The result? States from Rhode Island to Montana are scrambling to patch up budget holes, while federal watchdogs warn of potential cuts to Medicare that could total nearly half a trillion dollars over the next decade.
According to Fox Business and Realtor.com, Rhode Island has already made headlines with its so-called “Taylor Swift tax,” a new levy aimed at vacation homes valued at over $1 million. The pop superstar’s $17 million Westerly mansion became the poster child for this tax, which charges $2.50 for every $500 above the $1 million threshold. For Swift’s property alone, that means a hefty $136,000 in new taxes flowing into state coffers. Supporters argue it’s only fair that the wealthiest homeowners shoulder more of the burden to help offset lost federal support.
But Rhode Island isn’t alone. The domino effect is spreading, especially in states with Democratic majorities. Connecticut lawmakers are weighing income tax hikes for individuals earning more than $250,000 and couples making over $500,000. Their goal: counteract the loss of federal dollars caused by the Big, Beautiful, Bill’s spending cuts. Maryland has already acted, raising income tax brackets for top earners and introducing new levies—a 2% capital gains tax on those earning above $350,000 and a 3% tax on IT services. The Associated Press reports these moves are designed to stem a widening budget deficit that’s threatening public services.
Head west, and the story continues. Washington state’s latest budget includes a new tier in its capital gains tax, targeting earnings above $1 million. The tax is structured to hit high-value deals involving stocks, bonds, and other business transactions, a move that supporters say ensures the wealthy pay their fair share. Meanwhile, in Montana, lawmakers are debating a 1.9% property tax on second homes and vacation properties—particularly those owned by out-of-state residents. As Realtor.com points out, out-of-state owners already contribute 23% of Montana’s property tax revenue, and the proposed changes would reduce taxes for owner-occupied homes while asking vacation homeowners to pay more.
Why all this sudden tax activity? The answer lies in the federal deficit, which has ballooned in the wake of the Big, Beautiful, Bill. The nonpartisan Congressional Budget Office (CBO) released a report on August 15, 2025, warning that automatic cuts to Medicare could reach $491 billion between 2027 and 2034 if Congress doesn’t intervene. The root cause is a 2010 law that forces across-the-board cuts to many federal programs whenever new legislation increases the deficit. The Trump-era tax and spending law, now extended by the recent bill, is projected to add $3.4 trillion to the federal deficit over the next decade, putting immense pressure on bedrock social safety net programs.
Republicans, for their part, have repeatedly promised not to cut Medicare. Yet, as the CBO makes clear, unless lawmakers on both sides of the aisle come together to override the automatic cuts, the math simply doesn’t add up. “Republicans knew their tax breaks for billionaires would force over half a trillion dollars in Medicare cuts — and they did it anyway,” said Representative Brendan Boyle of Pennsylvania, the top Democrat on the House Budget Committee, in a statement quoted by the Los Angeles Times. “American families simply cannot afford Donald Trump’s attacks on Medicare, Medicaid and Obamacare.”
The stakes are particularly high for rural hospitals and low-income Americans. Hospitals in rural areas are already grappling with the fallout from Medicaid cuts included in the Big, Beautiful, Bill, and further reductions in Medicare funding could push some facilities to the brink. As noted by AP, these hospitals often operate on razor-thin margins, and any additional loss of federal support could have real consequences for patient care.
Republicans, meanwhile, have pushed back against the CBO’s analysis, arguing that the tax cuts will ultimately spur economic growth and generate new revenue. They also point to the $50 billion in funding for rural hospitals included in the legislative package as evidence that they’re not abandoning vulnerable communities. According to AP, GOP lawmakers have been critical of the CBO’s methods, insisting that the long-term benefits of lower taxes will outweigh the short-term pain.
Still, the numbers are hard to ignore. The CBO’s projection of $491 billion in potential Medicare cuts is based on existing law and past precedent. Historically, Congress has stepped in to prevent such automatic reductions, but that requires bipartisan cooperation—a commodity in short supply during an election year. The looming threat has galvanized Democrats, who requested the CBO analysis and are using it as ammunition in their efforts to protect federal health programs.
At the state level, the scramble to raise revenue isn’t just about plugging budget gaps. Supporters of new taxes on the wealthy and on luxury properties say these measures are about fairness, ensuring that those who have benefited most from recent economic gains contribute more to the public good. Critics, however, warn that higher taxes could drive investment out of state or discourage economic growth, especially in regions already struggling to attract new businesses.
The so-called “Taylor Swift tax” in Rhode Island has become a symbol of this debate. While some see it as a clever way to tap into the deep pockets of celebrity homeowners, others worry it could deter high-profile residents from maintaining a presence in the state. As Fox Business and Realtor.com both report, the tax is expected to generate significant new revenue, but its long-term impact on the local real estate market remains to be seen.
Montana’s proposed property tax changes reflect a similar dynamic. With nearly a quarter of property tax revenue coming from out-of-state owners, state lawmakers are betting that vacation homeowners can absorb a little extra pain. By reducing taxes for full-time residents, they hope to ease the burden on locals while still balancing the books.
As the dust settles from the passage of the Big, Beautiful, Bill, one thing is clear: the debate over taxes and spending in America is far from over. States are taking matters into their own hands, experimenting with new ways to raise revenue and protect essential services. At the same time, the federal government faces tough choices about how to manage mounting deficits without undermining programs that millions of Americans rely on.
With the 2026 midterms on the horizon and the future of Medicare and Medicaid hanging in the balance, lawmakers in Washington and state capitals alike will be tested on their ability to find common ground. The choices they make in the coming months will shape not only the nation’s fiscal health but the well-being of families from coast to coast.
