Reconciliation Bill Passed by House Republicans Would be Devastating for Californians

Budgets reflect our collective values and priorities. Yet, recent proposals in Congress would take our country in the wrong direction, threatening access to essential health care and food assistance for millions to help fund massive new tax breaks for the wealthy and fuel policies that cause harm and tear families apart. These choices make clear whose interests are being prioritized, and it’s not everyday people.

What would the federal budget reconciliation bill recently approved by the House mean for California?

• Higher costs for food and health care for millions of families and individuals, making it even harder to make ends meet when the cost of living is already too high.
• Increased hunger and poverty, including among children, as families face higher costs and lose access to support to meet basic needs.
• Lost access to life-saving treatments, routine doctor visits, and medications for older adults, people with disabilities, veterans, and people with low incomes, as their coverage gets pulled out from under them.
• More extreme income inequality and wider racial inequities, with the top 1% getting richer and people with lower incomes and people of color disproportionately harmed.
• Increased fear and danger for millions of Californians who are immigrants and their children as significant new funding supercharges immigration enforcement and cruel policies, including restrictions on assistance, single out immigrant communities.
• Huge new costs shifted to the state that it currently cannot absorb, destabilizing the state’s fiscal health and forcing state policymakers to make painful decisions that Congress is avoiding.

As the Senate considers modifying proposals in the House bill, this resource shows the significant and wide-reaching harm that proposed policies would inflict on communities across California.

Health Care

Medi-Cal, California’s Medicaid program, provides free or low-cost health coverage to nearly 15 million Californians — over 1 in 3 Californians — including children, pregnant individuals, seniors, and people with disabilities.

California has significantly expanded access to health coverage over the past decade, largely due to the federal Affordable Care Act (ACA), which the state fully implemented in 2014. A key component of this health care reform was extending Medi-Cal eligibility to low-income adults under age 65 without dependents. This group, known as the “ACA expansion population,” was previously excluded from Medicaid in most states. Today, they make up a big share of Medi-Cal enrollees (about 5 million people).

The ACA also established Covered California, the state’s health insurance marketplace where individuals and families can purchase private coverage with the help of federal and state subsidies. About 1.8 million Californians rely on Covered California.

Alongside Medi-Cal and Covered California, Medicare is a critical pillar of California’s health care system. Medicare is a federal program that provides health insurance to people age 65 and older and to younger individuals with long-term disabilities. About 6.6 million Californians are enrolled in Medicare, including 1.6 million people who are dually eligible for both Medicare and Medi-Cal due to their age and income level.

California has gone further than many states by expanding full-scope Medi-Cal to undocumented immigrants, helping drive the state’s uninsured rate to historic lows. Because federal law prohibits using Medicaid funds for this coverage, this expansion is funded entirely by the state.

But all of this progress is now under threat.

House Republicans have proposed a bill that would dismantle key components of the ACA and make the deepest health care cuts in history — slashing over $800 billion in federal funding over 10 years, with most of those cuts targeting Medicaid. These cuts would take health coverage away from millions of Californians, increase out-of-pocket costs for millions more, and force families to make impossible choices between getting the care they need and covering rent, groceries, or other essentials.

The damage wouldn’t stop at Medi-Cal. The proposal would also make health coverage less accessible and less affordable for the millions of people who rely on Medicare and Covered California.

In total, the bill would strip billions in federal funding from California — destabilizing the state’s health care system and fiscal health, and threatening the health and economic security of millions of Californians.

Major Impacts of the House Bill on Medicaid (Medi-Cal)

The House bill includes a number of harmful proposals that would weaken Medicaid (Medi-Cal) and put health coverage at risk for millions of Californians, including children, older adults, people with disabilities, and the nearly 5 million adults in the ACA expansion population. It would:

• Penalize states that provide health coverage to certain groups of immigrants effective October 2027. Specifically, if a state provides health coverage to people who are undocumented as well as people with other immigration statuses, the House bill would reduce the federal matching rate for covering the Medicaid expansion population under the ACA from 90% to 80%. To avoid this penalty, state leaders could decide to end state-funded coverage for undocumented immigrants and eliminate health coverage for roughly 218,000 children and 1.4 million adults in California. Maintaining current Medi-Cal coverage under this penalty would increase state spending by an estimated $27.5 billion from 2028 to 2034. In the first year alone, the additional cost would be about $3.2 billion.
• Put up to 5 million adults in California at risk of losing Medi-Cal due to burdensome work requirements beginning no later than December 2026. This policy change would require adults in the ACA expansion population to prove they are working, looking for work, or participating in job training programs for at least 80 hours per month in order to maintain their Medi-Cal coverage. Work requirements are essentially cuts that would cause significant health coverage losses. Although up to 5 million adults are at risk of losing Medi-Cal, the number could be lower — ranging from 2.3 million to 3.4 million — depending on the data matching methods that California could use to automatically exempt enrollees based on parenthood or wage data.
• Make it more expensive for many adults to access health care by imposing mandatory cost-sharing of up to $35 per service for certain adults beginning October 2028. In this context, cost-sharing refers specifically to copayments: the fixed out-of-pocket fees people must pay when they receive a health care service. Even modest costs can lead people to delay or skip needed care, putting their health at risk. Currently, most Medicaid enrollees do not pay copayments, and some services (e.g., emergency care, pregnancy-related care, and family planning) are fully exempt. Under this proposal, states would be required to impose copayments for all non-exempt services, which the House bill would expand to include primary care and behavioral health services. Providers would also be allowed to deny care to people who cannot pay the required copayment, making it even harder for low-income adults to access care.
• Make it more challenging for adults in the ACA expansion population to maintain their Medi-Cal coverage due to increased eligibility checks starting in late 2026. The House bill would require states to conduct eligibility redeterminations at least every six months for ACA expansion adults. Current law requires states to do this every 12 months. The redetermination process often involves complex paperwork and documentation requirements, which can be burdensome for people to navigate. Additionally, many Californians experience long wait times when trying to contact county Medi-Cal workers to address eligibility questions or submit necessary information. This change, set to take effect on December 31, 2026, would make it more challenging for adults to maintain their Medi-Cal coverage.
• End gender-affirming care as an essential health benefit. About 36,000 transgender, gender expansive, and intersex (TGI) Californians with low-incomes who qualify for Medi-Cal access treatments that align with their gender identity and allow them to live safe and healthy lives. Gender-affirming care saves lives, and for the 50% of TGI Californians who experience serious mental health challenges every year, this care is critical to ensuring they can survive.
• Severely reduce access to preventive care, primary care, and reproductive and sexual health care by defunding providers that offer abortion services. Specifically, the House bill prohibits Medicaid funding to be used to pay for services provided by Planned Parenthood for 10 years. More than 80% of Californians who seek care at Planned Parenthood health centers rely on Medi-Cal for their health coverage, meaning the large majority of Californians receiving critical care from Planned Parenthood would be severely restricted in their access to preventive care, primary care, and reproductive and sexual health care. Federal law already prohibits Medicaid from covering abortion services, except in certain circumstances.
• Restrict states’ ability to raise revenue for Medicaid by prohibiting new or increased provider taxes — a key financing tool that states use to fund Medicaid and other important health care investments. This would directly threaten California’s ability to raise and allocate revenue through the Managed Care Organization (MCO) tax, which helps bring in additional federal funds to sustain and improve Medi-Cal coverage and access, especially in communities that have long faced barriers to care. The bill also mirrors a proposed federal rule that would further restrict how provider taxes can be structured.
• Keep harmful policies in place that make it harder for people to access and maintain Medi-Cal health coverage. Specifically, the bill blocks federal reform that would make it easier for children, seniors, and people with disabilities to enroll and maintain health coverage. This rule was designed to reduce administrative barriers, prevent unnecessary coverage losses, and improve continuity of care.

Major Impacts of the House Bill on Medicare

The House bill includes harmful provisions that would undermine Medicare and put health coverage at risk for millions of older adults and people with disabilities. It would:

• Take Medicare away from certain immigrants who currently qualify. Medicare is an earned benefit. People qualify for Medicare if they have worked in the US for at least 10 years or if they have a spouse who has. Currently, immigrants with legal permission to live and work in the US can qualify for Medicare if they meet the work criteria. The House bill would restrict access to US citizens, green card holders, certain Cuban parolees, and individuals from COFA nations (Compacts of Free Association). This means many immigrants who have spent years contributing to Medicare would be blocked from ever receiving the benefits they’ve earned — an exclusion that is unfair and deeply unjust.
• Keep harmful policies in place that make it harder for low-income seniors and people with disabilities to afford health care and prescription drugs. Specifically, the House bill would block federal reform that would have allowed more low-income Medicare beneficiaries to enroll in the Medicare Savings Program, which covers Medicare premiums and often other out-of-pocket costs through Medicaid. The rule would simplify the process and require states to automatically enroll people who receive SSI. Blocking this change would leave many without critical financial assistance.
• Keep unsafe nursing home conditions in place, putting seniors and people with disabilities at risk. The House bill would block implementation of a new federal rule finalized in May 2024 that requires nursing homes to increase staffing levels and report more information about worker pay. These long-overdue reforms were designed to address dangerously low staffing levels that put patients at risk. Delaying these protections would prolong unsafe conditions for many older adults and people with disabilities who depend on nursing homes for daily care.

Major Impacts of the House Bill on Covered California

The House bill includes sweeping changes that would reduce access to Covered California and raise health care costs for many Californians, especially immigrants and people with fluctuating incomes. It would:

• Take Covered California support away from certain immigrants who currently qualify. The House bill would cut off premium tax credits and cost-sharing assistance for nearly 112,000 Californians who rely on Covered California to afford health insurance. It would eliminate eligibility for many immigrant groups, including people with work or student visas, refugees, survivors of trafficking, and DACA recipients (Deferred Action for Childhood Arrivals). If enacted, this change could make it harder for thousands of individuals and families to afford health coverage and may lead to more people going without care or falling into medical debt.
• Fails to extend enhanced premium tax credits, making Covered California coverage much more expensive. Without action, an estimated 2.4 million Californians would face higher premium costs, and up to 183,000 people could lose coverage altogether when the credits expire at the end of 2025. Monthly premium costs would rise by an average of 63%, with even steeper increases for communities of color — up to 76% for Latinx enrollees and 71% for Asian enrollees.
• Make it harder for people to get health coverage through Covered California. The House bill would cut California’s open enrollment period from 90 days to 45 days. If this policy change was in place this past year, it would have prevented over 100,000 Californians from being able to enroll in health coverage. The bill would also eliminate year-round enrollment for people with incomes under 150% of the poverty line, making it harder for those with low or unstable incomes to sign up when they need coverage. In addition, the bill would end automatic renewals and require eligibility to be verified before enrollment, creating new barriers that could lower enrollment and increase the number of uninsured Californians.
• Raise health care costs and penalize people with fluctuating incomes. Under current law, people who get premium tax credits through Covered California only have to repay a portion if their income ends up higher than expected, but the House bill would remove those protections and require full repayment, no matter their income level. It would also end cost-sharing assistance for people who enroll outside of the standard open enrollment window. These changes would make coverage more costly and less stable for many Californians, especially seasonal employees, gig workers, and others who have fluctuating incomes.

Food Assistance

SNAP nutrition assistance (CalFresh in California) helps over 5 million Californians each month, including workers with low-paying jobs, buy the food they need to support their households. It brings billions of federal dollars into the state each year that Californians spend in their communities which helps boost local businesses and jobs. In early 2023, CalFresh kept 1.1 million state residents out of poverty, reducing California’s poverty rate by 3 percentage points, according to the Public Policy Institute of California.

The House reconciliation bill would dramatically raise costs and reduce food assistance for millions of Californians by cutting federal funding for SNAP by nearly $300 billion — about 30% — the largest cut in the program’s history. These cuts would increase poverty, food insecurity, and hunger, among children, older adults, people with disabilities, and many others. The House bill would force state leaders to make painful cuts to this vital support and break the foundational agreement that food benefits are a federal responsibility as an entitlement program. Here are some of the major impacts in California.

The House bill would:

• Put the state on the hook for nearly $4 billion more per year. The largest cut to the SNAP program would involve a fundamental change to the funding structure, where states would be required to pay a portion of SNAP benefits. In California, based on recent trends, the state would be responsible for about $3.1 billion annually to maintain current benefit levels. Shifting a share of the cost of CalFresh benefits to California would likely make it impossible for the state to cover benefit costs during recessions when the need for food assistance rises but state revenues decline. Additionally, the bill would require states to increase the proportion of administrative costs they cover from 50% to 75%, which in California would mean that the state would have to pay an additional $600 million per year. It would be extremely difficult for California to find nearly $4 billion in California’s already strained budget fast enough to prevent families and individuals from losing benefits. This would put Californians who rely on CalFresh to meet their basic food needs at risk of facing reduced benefits or exclusion from the program entirely.
• Put 286,000 adults with school-age children and 201,000 older adults at risk of losing their CalFresh benefits as a result of harsh time limits. The bill would expand its already restrictive time limits for food assistance to caretakers of school-age children and older adults between the ages of 55 and 64, putting a total of 888,000 Californians, who live in households with impacted adults, at risk of losing part of their household benefits. These program participants would be limited to three months of food assistance across three years unless they show compliance with a 20-hour-per-week work requirement or prove they qualify for an exemption, such as having a disability. Work requirements are punitive and ineffective bureaucratic hurdles for families that do not lead to increased employment. Rather, they push caretakers, people with disabilities, people with mental health challenges, people who live in high unemployment areas, and people with precarious employment off assistance. Additionally, the bill would make it very difficult for states to receive waivers for time limits in most high unemployment areas, thereby demanding people work for food assistance even when jobs are not readily available.
• Cut CalFresh benefits for all 5.5 million program participants. The bill would permanently freeze the cost of the Thrifty Food Plan (TFP) outside of inflation adjustments. The TFP had not been updated since the 1970s to reflect current science-based dietary recommendations or the economic realities of buying and preparing food prior to a 2021 expansion. The bill would prevent future revisions, effectively decreasing already limited benefits and making it significantly harder for families to afford groceries. Additionally, the bill would increase the paperwork burden required to get utility deductions and remove internet costs as a deductible expense, which would decrease the amount of assistance most households would receive. 
• Potentially put significant pressure on other programs by cutting SNAP. Programs that provide food to school-age children could be directly impacted as a result of the SNAP cuts. The Summer EBT program, otherwise known as SUN Bucks, provides modest assistance to families during the summer breaks to help when school meals are not an option. The amount of benefits is based on the TFP, which would be eroded over the years through this bill. Additionally, schools use a data-linking process to help identify students who participate in CalFresh in order to receive reimbursement for free or reduced-price school meals from the federal government. If students lose their CalFresh status, the state may be on the hook to pay for meals through the universal meals program. As a whole, cuts to SNAP mean that more people will experience food insecurity, which could put pressure on underfunded food banks and other programs, like the Women, Infants, & Children (WIC) program, to help mitigate the harm.

Immigrants

California is home to the largest share of immigrants in the US and immigrants are an integral part of California’s social fabric, pay taxes, and contribute to its economic success. Over half of all California workers are immigrants or children of immigrants, and the more than 2 million Californians who are undocumented make significant contributions to state and federal revenues, contributing $8.5 billion in state and local taxes in 2022, despite their exclusion from most public benefits.

Federal cuts and other harmful policies targeting immigrants will have detrimental effects on families, communities, and the state’s entire economy. The House reconciliation bill would deprive children and families of nutrition and health care, while supercharging an immigration enforcement agenda that threatens constitutional protections. It provides billions in largely unrestricted funds for the Trump Administration’s immigration enforcement agenda and presents a generational threat to democratic rule of law and community safety across the country. Here are some of the major impacts in California.

The House bill would:

• Increase fear and danger for millions of Californians who are immigrants and their children, as $150 billion in unrestricted funds are directed to immigration enforcement, with detrimental effects on families, communities, and the state’s entire economy. Restrictive and harsh immigration policies negatively impact how immigrants interact with public services and institutions through a “chilling effect,” result in negative health and financial outcomes, and harm key industries like housing, farming and food production, and caregiving. This unprecedented increase in enforcement would also negatively impact US-born workers:  Immigrants generate jobs for US-born workers directly as entrepreneurs and indirectly, as research has shown that for every 13 foreign-born workers who leave the labor force because of direct removals and the chilling effect of deportations, 10 US-born workers lose their jobs.
• Jeopardize Medi-Cal coverage for certain immigrants, including roughly 218,000 children and 1.4 million adults in California. It would cut federal Medicaid funding to California as a penalty for providing health care to certain groups of immigrants — including people who are undocumented, refugees, asylees, and survivors of domestic violence and sex trafficking — which would result in the state losing $27.5 billion in federal funding from 2028 to 2034 unless California ends this coverage.
• Take away Medicare from certain groups of immigrants, including refugees, asylees, and some survivors of domestic violence and sex trafficking. Since workers contribute to Medicare through taxes from their paychecks, this exclusion means taking away health care from people who have paid for and earned this benefit (see Health Care section).
• Bar certain groups of immigrants from qualifying for subsidies that help people afford health insurance in Covered California (see Health Care section).
• Take SNAP food assistance — CalFresh in California — away from immigrants who are not naturalized citizens or do not hold a green card. This means refugees, asylees, and immigrants who are trafficking survivors or survivors of domestic violence would be excluded from federal nutrition assistance. CalFresh benefits are completely funded by the federal government, so, without state action to ensure access to state-funded benefits, this provision will cut off immigrants from a key tool to providing food on the table for themselves and their families.
• Create harsh and inequitable tax rules for immigrant filers and their US citizen family members. It would exclude 910,000 US citizen and legal resident children in California from the Child Tax Credit if one or both of their parents do not have Social Security Numbers (SSNs), even though these parents collectively pay billions in state and local taxes every year. It would also prohibit immigrants without SSNs and mixed-status families from receiving tax credits for college students, and would take away Premium Tax Credits — which help people afford health coverage — from immigrants with certain legal statuses, including but not limited to refugees, asylees, and domestic violence and trafficking victims. Additionally, the bill would implement a remittance tax only for immigrant filers on transfers of funds to people in other countries.

Federal Policy

The federal government plays a major role in shaping California’s budget, economy, and the well-being of its people.

Learn how federal policies shape California’s budget, economy, and vital programs — and how state leaders can respond to protect and support Californians.

Explore Federal Resources

Refundable Tax Credits

Credits like the Earned Income Tax Credit (EITC) and Child Tax Credit are proven tools for improving economic security among Californians with low and moderate incomes, and they’ve been linked to long-term benefits for children, including better health and school achievement.

The House reconciliation bill aims to take away benefits from millions of families and children, causing profound harm in the short and long term. The bill proposes imposing inefficient administrative burdens on families applying for the EITC, excludes even more families from the Child Tax Credit, and threatens to take away mechanisms meant to streamline tax filing. At the same time, none of these types of requirements are being proposed for the wealthy and corporations set to claim the grossly generous benefits outlined in this same bill. This package has been proposed under the guise of maximizing efficiency. In reality, it enforces exclusionary and ineffective requirements intended to discourage families from accessing public supports for which they are eligible. Here are some of the major impacts in California.

The House bill would:

• Take the Child Tax Credit away from 910,000 US citizen children and children with legal residency in mixed status families in California by requiring that their parents have a Social Security Number (SSN) for their children to receive the credit, as discussed in the Immigrants section. In addition, the bill permanently excludes children who do not have a SSN. This proposal is particularly harmful to mixed-status families and immigrants who are already ineligible for most public supports.
• Exclude 2 million children with low incomes in California from a temporary increase in the Child Tax Credit that benefits moderate to higher income families and fails to end the current exclusion of those children from the full credit simply because their families’ income is too low.
• Put over 1.7 million families in California, including more than 2.8 million children, at risk of losing the EITC due to significant new administrative burdens. By introducing a new precertification system, similar to one previously proven to be inefficient and wasteful, families would be required to apply for a certificate for each qualifying child before they could claim the EITC when filing their taxes. This new system would require more time-consuming paperwork and likely cause eligible families to lose access to the credit.
• Terminate the IRS Direct File program, taking a free tax filing option away from millions of eligible California taxpayers. This program was successfully piloted in states like California in 2024, and significantly expanded in 2025, following widespread interest in the program. California was planning to integrate its existing free state filing system, CalFile, with Direct File in 2026 to make federal and state tax filing easier for Californians. Eliminating this program would mean many families and individuals will continue losing money paying to file their taxes.
• Fail to extend enhanced Premium Tax Credits that made Covered California health coverage more affordable (see Health Care section).
• Exclude many immigrants and their families from tax benefits for which they were previously eligible (see Immigrants section).

Tax Cuts

The House reconciliation bill contains a costly, upside-down tax package that would largely benefit high-income people and corporations, and would be paid for by the historic cuts to health coverage and food assistance that would cause deep harm to millions of Californians.

The tax provisions of the bill are estimated to cost nearly $4 trillion over 10 years — this includes extending the expiring tax cuts enacted in 2017 and adding more tax cuts on top of that. About 44% of the tax benefits would go to the richest 5% of Americans in 2026, while the bottom 20% of Americans would only get around 1% of the benefits — and any tax benefit received by low-income households would largely be offset by cost increases resulting from the bill’s proposed health care and food assistance cuts. Here are some of the major impacts in California.

The House bill would:

• Give an average tax cut of almost $40,000 to the richest 1% of Californians (fewer than 200,000 households that have incomes of more than about $1 million), while giving the bottom 20% of Californians (representing nearly 4 million households) a cut of only $170 on average in 2026 — an amount that would be wiped out by the cuts to health care and food assistance, as well as the impacts of tariffs on the cost of goods and services.
• Expand and make permanent a tax break mostly benefiting wealthy business owners. Even under the existing, smaller tax break, millionaires receive more than half of the total benefits.
• Permanently weaken the federal estate tax so that wealthy people can pass on up to $30 million to their heirs without any taxes. If the 2017 tax law were to expire, this would drop to about $11 million, but instead the bill would continue to allow more wealthy families to pass on tens of millions without paying a cent of tax, further entrenching wealth inequality. In California, only 743 estates were subject to the federal estate tax in 2022.
• Give corporations more than $160 billion in tax breaks (nationwide) in the near term by rolling back provisions from the 2017 tax law that were intended to help offset the cost of the huge, permanent reduction in the corporate tax rate from 35% to 21% — and adding some new tax breaks as well. Some of these provisions are set to expire in a couple of years — but just like what is happening now, corporations would likely lobby to extend or make those cuts permanent and Congress would oblige.
• Provide a generous tax break for donors contributing to private school voucher programs, allowing some wealthy donors to make a profit off their donation while depleting revenues for public schools, as discussed in the Education section.

Education

California’s Constitution guarantees free public education from transitional kindergarten through 12th grade. Serving nearly 6 million students, the system is primarily funded by the state and local property taxes and governed by statewide requirements, with local school boards responsible for critical spending decisions. The state also has an extensive postsecondary public education system of colleges and universities, serving more than 2.5 million students. Given the high cost of completing a postsecondary education, many students depend on state and federal aid to afford the high cost of attendance.

The current version of the budget reconciliation package includes proposals that would significantly undermine public education and harm students at every level. For higher education, the reconciliation package slashes access to federal aid by weakening Pell Grants and loan programs, pushing college further out of reach for millions of California students. While PK-12 federal funding would not be impacted through this process, the bill advances a proposal that seeks to expand school vouchers, prioritizing private schools at the expense of public education. This proposal defies the will of California voters, who have consistently rejected school vouchers, and creates a tax giveaway for the wealthy for funneling public dollars into private schools.

The House bill would:

• Drastically overhaul the federal loan system, likely impacting the almost 4 million California students who receive federal loans. The bill eliminates multiple repayment plans, leaving students with only two options for loan repayment. New limits on loans for students in undergraduate, graduate, and professional programs will also be imposed under this package. In addition, it ends the PLUS loan program for graduate and professional students and subsidized loans for undergraduate students. Finally, the bill creates a “skin-in-the-game” agreement with universities receiving federal grants that would force these institutions to pay a penalty for late or missed loan payments.
• Alter the eligibility criteria for the Pell Grant, which serves over 818,000 students across California’s higher education institutions. In the CSU system alone, 60% of Pell Grant students are at risk of having their grant amount reduced or cut entirely due to these new restrictions. The bill increases the credit requirement from 24 to 30 to be considered a full-time student and therefore eligible for the maximum Pell amount. Students must also be enrolled in at least 15 credits to receive any portion of the grant. In addition, families who have a high Student Aid Index will no longer be eligible even if their incomes are low, but they have significant assets.
• Result in major revenue losses for California and weaken funding for public schools by incentivizing contributions to private school vouchers. The tax plan (see Tax Cuts section) includes a provision that would provide a “dollar-for-dollar” tax credit to people who donate to private school voucher nonprofits, capped at $5 billion per year nationwide. Additionally, the tax bill would allow the wealthy to donate corporate stock to a voucher-granting organization as a way to avoid paying state and federal taxes on their profits, preventing state and federal governments from collecting more than $2 billion in capital gains tax revenues over 10 years. For California, that would mean a revenue loss of nearly $177 million over a decade.  While the California Constitution prevents public dollars from being used to operate a voucher program, this proposal circumvents this, and the impacts on school districts would be two-fold. Given that state revenues are directly connected to the level of funding available for TK-12 schools, a reduction in revenues would result in a lower funding guarantee through Prop. 98. Moreover, when students use a voucher to leave public schools, their district loses per-pupil funding that supports teachers, programs, and services for all students.

Housing

Safe, affordable housing is the foundation for all families and individuals to thrive. A key tool in financing affordable housing is the federal Low Income Housing Tax Credit (LIHTC) program. Through LIHTC, states award tax credits to developers, who then sell them to financial institutions and other outside investors to help finance the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households. The House reconciliation bill proposes some positive reforms to LIHTC. However, this progress is eclipsed by the extreme tax cuts and the erosion of anti-poverty programs Californians are entitled to.

The House bill proposes key temporary changes to the LIHTC program for 2025 to 2029, including:

• A 12.5% allocation increase for three years which increases the amount of LIHTC funding states will receive to support affordable housing projects.
• Lowering the bond-financing threshold from 50% to 25% which makes the credit more accessible for certain projects. 
• Designating rural and tribal areas as “Difficult to Develop Areas” which allows an increase in credits that housing developments in these areas can receive.

While these adjustments are important, the bill’s unjustified corporate tax cuts have the potential to undermine these changes. When corporate taxes are lowered, as they were during the first Trump administration, the value of LIHTCs drops because financial institutions have less tax liability to offset. This reduces investor demand and lowers tax credit pricing. When tax credits have a lower value, it makes affordable housing projects harder to finance and often results in delays. It then continues to exacerbate the housing shortage and provides no real or urgent relief to Californians. Meanwhile, corporate landlords with significant real estate holdings are among the corporate interests that stand to benefit from the tax cuts in the reconciliation bill. Ultimately, reforming LIHTC means little if it comes at the cost of slashing corporate tax liability, health care, food assistance, and other basic necessities because families and communities will be left worse off regardless.

Resource Roundup

The Budget Center and our partners have produced a number of key resources that provide additional analyses and details on the impacts of the House reconciliation bill. Select resources are listed below. Please see our Federal Policy page for all federally focused publications and partner resources.