What does Trump's 'big, beautiful bill' mean for global development?

U.S. President Donald Trump’s “big, beautiful bill” has officially been signed into law — and after weeks of deliberation, the 900-page package is on its way to reality. There’s a multitude of tax cuts, which are largely expected to benefit America’s wealthiest. Boosts to border and defense spending, with an extra $25 billion for the development of a “golden dome” missile system alone. And slashes to America’s public assistance programs, such as Medicaid, with nearly 12 million expected to lose their health insurance by 2035. Two of the provisions mostly closely watched by the development sector did not make it into the final bill — including one that would have placed an escalating tax on foundations, and another that would have allowed the Treasury secretary to designate a nonprofit as a terrorist organization. Even so, the bill’s impact will ripple across the sector, with a surge in domestic need expected to further squeeze aid budgets, and a tax on remittances estimated to reduce cash to migrant families by billions of dollars each year. “This bill is a contradictory mix of meaningful progress for charitable giving and deeply harmful setbacks for the communities philanthropy exists to support,” said Deborah Aubert Thomas, the president and CEO of United Philanthropy Forum, in a statement. “We are proud of the sector’s unified advocacy that helped secure major wins — but we unequivocally condemn the devastating cuts to core safety-net programs like Medicaid and SNAP [Supplemental Nutrition Assistance Program].” What’s in: Remittance tax Remittances — the money migrants send home to family and friends — have long outstripped official development assistance. Last year, global remittances reached $685 billion, and for some countries, those cash flows made up between one-third and half of their gross domestic products. But with Trump’s 1% tax, experts estimate that flow could fall by 1.6%, both due to the tax itself and the discouragement of remittances overall. For Mexico alone, that means a loss of over $1.5 billion a year, slicing away cash for the things remittances are typically used to fund: food, housing, education, and health care. That’s a loss nearly 30 times larger than what Mexico is projected to lose from the collapse of the U.S. Agency for International Development, according to an analysis by the Center for Global Development. “It’s this double-whammy: the remittance tax impact coming off the back of aid cuts,” said Helen Dempster, a deputy director at CGD and co-author of the analysis. “Remittances were going to be even more important,” especially for smaller countries where that cash flow accounts for a large share of gross national income. “Now, they’re suffering from this extra blow.” Liberia, for example, used to receive one-quarter of its foreign assistance from the U.S. — and the collapse of USAID was projected to cut 2% of the country’s gross national income. Now, the remittance tax will dissolve another 0.16%, according to CGD. “We would have expected that in the wake of these aid cuts, diaspora communities would look at how their friends and family back home are being affected, and would increase their remittance sending — so this is really dampening that potential flow,” Dempster said. Critics of the tax also fear it will force undocumented migrants to resort to illicit channels to smuggle money abroad, which could lead to scams and even empower organizations such as drug cartels. Still, the impact is not as stark as it could have been. The first version of the bill proposed a remittance tax of 5%, one that would affect non-citizens, including green card holders, temporary workers, and the undocumented. It was later reduced to 3.5%, and ultimately dropped to 1% — but today, the tax will apply to all remittance senders, including U.S. citizens. What’s in: Boosts to immigration enforcement The bill proposes a spectacular spike in immigration spending, with an unprecedented $165 billion slated to be channeled to the Department of Homeland Security. It’s the largest cash infusion for domestic immigration enforcement in history — and with the funding aiming to enable the deportation of 1 million people every year, the surge is expected to rock communities on both sides of the U.S. border. For one, Dempster said, there’s the impact on remittances: Fearing deportation, migrants may avoid visiting Western Unions or other facilities to send cash home, halting remittance flows across the world. For another, there are issues of capacity: With the loss of USAID funding, many countries’ social services have been strained — including those for deported migrants. USAID’s dismantling led to the cancellation of some $2.3 billion in migration-related awards and grants, according to the Migration Policy Institute — including $200 million specifically geared toward deterring migration from Central America. Many are skeptical that the Trump administration can achieve such a high number of deportations, as last year, the Biden administration deported more than 270,000 people — the highest number recorded since 2014. Even so, the Department of Homeland Security is hailing the bill as “historic.” What’s in: Cuts to domestic food and health aid To pay for a surge in tax cuts, defense spending, and deportations, Trump’s megabill places the country’s social safety net in the bull’s eye. It’s unclear exactly how that rising need will impact foundations focused on both international and domestic work — but with exacerbated challenges at home, it’s likely to lead to a squeeze on philanthropic dollars. The non-partisan Congressional Budget Office estimates that the bill’s changes to Medicaid could strip 11.8 million people from their health care; the left-leaning Center on Budget and Policy Priorities estimates that 5 million people could lose their support under the Supplemental Nutrition Assistance Program. That includes refugees and asylum seekers, two groups of immigrants who will also be subject to new fees proposed by the bill. Global Refuge, a faith-based nonprofit, listed them out: The fee to apply for temporary protected status, for example, will rise from $50 to $500. The organization described the bill’s impacts as “profoundly destabilizing to immigrant communities across the country, making access to humanitarian protection more costly, access to work permits more difficult, and access to health care more restrictive.” That view was echoed by Deborah Aubert Thomas of United Philanthropy Forum, a network representing some 7,000 foundations. In a statement, the forum said it “strongly condemn[ed]” the bill’s cuts to Medicaid and SNAP, which will “dramatically increase the need for charitable services.” What’s in: Changes to philanthropic giving Both individual and corporate donors will see changes as a result of the new tax bill. For individuals, the package allows all taxpayers to deduct up to $1,000 in charitable giving — even those who don’t itemize. Those who advocated for the change feel it could enable more giving by everyday Americans, with those filing as a married couple eligible to deduct up to $2,000. Under the new bill, wealthier donors will also receive a slightly smaller tax break for charitable giving, at 35% instead of 37%. Though that percentage change is small, the dollar impact is big on large gifts. According to Indiana University’s Lilly School of Philanthropy, it will reduce charitable giving by between $41 billion and $61 billion over the next decade. On the corporation side, the bill will introduce a new floor on charitable deductions: Businesses will need to contribute at least 1% of their taxable income to qualify for a charitable deduction. This floor is expected to reduce corporate giving by an estimated $4.5 billion per year, according to EY's Quantitative Economics and Statistics practice. What’s out: Excise tax on foundations In the first version of the bill, lawmakers proposed adding an escalating tax on private foundations, one that would have cost the philanthropic sector $2.9 billion a year. Today, foundations’ investment income is taxed at 1.39% — but earlier in the bill-drafting process, a tiered system was slated to tax foundations depending on their wealth. Those with assets between $50 million and $250 million would have been forced to pay an excise tax of 2.78%, while those with assets between $250 million and $5 billion would pay 5%. And the largest foundations — those with assets above $5 billion — would have been taxed at 10%. The provision was fiercely fought by the philanthropic sector and ultimately removed by the time Trump signed the bill into law. “We are deeply grateful to the members of Congress who defended charitable giving by stopping a harmful private foundation tax hike that would have devastated organizations supporting those in need across the country,” said Christie Herrera, the head of the Philanthropy Roundtable, which counts conservative foundations as many of its members. “Their leadership ensures that more resources go to those who guard and support our free society — not into the bureaucratic machinery of Washington.” Other provisions affecting philanthropy were also stripped from the final bill, including those that would have taxed parking benefits and logo royalties, according to the United Philanthropy Forum. What’s out: The ‘nonprofit killer’ clause A provision known by critics as the “nonprofit killer” — which would have allowed the Treasury secretary to unilaterally designate a nonprofit as a terrorist-supporting organization — was removed from the bill in late May. It was a provision that was far from new on Capitol Hill. Over the last year, Republican lawmakers have inserted the clause into several different pieces of legislation, despite pushback from advocates and other members of Congress. While it is already illegal for nonprofit groups to support terrorism, the bill would have made it easier for the executive branch to label organizations as doing so, and strip them of their tax-exempt status — something that would hammer the group’s reputation even as they appealed it in court in what would likely be a lengthy legal process. What’s in: Cuts to renewable energy spending Trump’s tax bill marks a dramatic — albeit expected — turn in U.S. climate and energy policy, with the legislation rolling back a series of domestic tax measures that will dissolve the U.S.’s climate goals, and trickle down to clean energy investments in low- and middle-income countries. Under the Paris Climate Agreement, the U.S. had previously aimed to cut emissions by 50% by 2030 — but with the new bill, those emissions are slated to fall by just 2% below current levels during the same time period, according to an analysis by Princeton University. That’s not to say the world won’t move forward, said David Goldwyn, the chair of the Atlantic Council Energy Advisory Group, and president of Goldwyn Global Strategies. While the bill will likely slow U.S. efforts to become a clean energy powerhouse, China is likely to extend its lead on the manufacturing and deployment of such technologies, he said. “We’ve just handed the market to China, and absented ourselves,” said Goldwyn, who was also the former special envoy and coordinator for international energy affairs at the U.S. State Department. “We were building an alternative, and an alternative supply chain. And now that alternative supply chain will have to come from other places.”