Summary: Key TCJA Measures (2017) & Trump Megabill (2025)

Other key tax measures:

• Through 2028, individuals may deduct up to US$25,000 in annual tip income; overtime workers can deduct up to US$12,500 if their income is below US$150,000 (US$300,000 for couples).
• Adults 65+ may receive an extra US$4,000–US$6,000 deduction until 2028, depending on income.
• The child tax credit rises to US$2,200 per child.

While high-income earners benefit most from the tax relief measures, the Megabill imposes sweeping cuts to core social safety nets. Over the next decade, funding for Medicaid, Medicare, and the Affordable Care Act will be reduced by US$930 billion. These programs currently provide coverage to roughly one in five Americans, and estimates suggest as many as 11 million people could lose access by 2034. Additionally, the Supplemental Nutrition Assistance Program (SNAP), the nation’s largest anti-hunger initiative, faces a US$186 billion funding cut. These reductions are likely to increase access barriers for Medicaid and SNAP recipients, disproportionately affecting rural and low-income communities.

Beyond the Budget: Megabill's True Cost

One of the most contentious aspects of the Megabill is its spending direction. Instead of addressing urgent infrastructure and healthcare needs, the bill channels vast resources into defense and immigration enforcement. An additional US$150 billion will be spent on military capabilities, including naval expansion and a new missile defense system known as the “Golden Dome.” Another US$100 billion is allocated to border security, doubling detention capacity and expanding personnel to make ICE the largest federal law enforcement agency.

Even more concerning is the bill’s failure to address the ballooning national debt. As of March 2025, US debt reached US$36.56 trillion, with annual interest payments at US$684 billion. The fiscal year 2024 ended with a deficit of US$1.9 trillion, and the first two months of FY2025 have already produced a US$600 billion shortfall. The Congressional Budget Office projects a FY2025 deficit of 6.2% of GDP. If current trends continue, and the Megabill’s projected US$3.4 trillion in added spending is realized, the national debt could exceed US$58.9 trillion by 2035.

As of the end of 2024, the average interest cost on US Treasuries stands at 3.32%. With national debt continuing to rise, the Congressional Budget Office projects that annual interest expenses could reach as high as US$1.8 trillion.

Currently, government revenue is approximately US$4.95 trillion. Assuming a 5% annual growth rate over the next decade, total revenue would rise to just over US$8 trillion by year ten. However, if interest payments climb to US$1.8 trillion, this would represent more than 20% of total revenue.

Such a scenario would significantly constrain the federal government’s fiscal space, leaving less room for essential public investment, social programs, and long-term economic planning.

The Actual and Projected Annual Interest Costs Paid by the US Government

Sources: Congressional Budget Office (CBO), January 2025

Our Assessment: The Trump Megabill's Impact

Despite being billed as one big, beautiful piece of legislation, President Trump’s new “Megabill” lacks the economic punch of the 2017 tax cuts he championed during his first term. Back then, corporate taxes were slashed, and individuals across income levels saw meaningful reductions in their tax bills. That package had sweeping effects on both business investment and consumer confidence.

In contrast, the current bill offers more limited incentives. For businesses, it provides tax savings through deductions on equipment purchases, research and development, and factory construction. These targeted measures may help select industries, but they fall short of the broader stimulus seen in 2017.

On the personal tax front, there are no new reductions. Instead, the bill simply prevents the 2017 tax cuts from expiring and reverting to higher rates. Aside from a modest benefit for specific groups like tipped workers, most individuals will see little to no change in their tax burden.

What’s more concerning is the bill’s approach to spending. Rather than investing in infrastructure or broad-based economic initiatives, the focus is heavily skewed toward defense and border security. At the same time, the bill cuts billions from social safety net programs like Medicaid and SNAP. These moves reflect the administration’s political agenda but offer little to support overall economic growth or long-term productivity.

And while the bill adds to the spending ledger, it does nothing to address the most persistent threat to the US fiscal outlook: the growing budget deficit and rising national debt. For a bill that aspires to be monumental, in our point of view it misses the mark on solving the country real problem.

The Megabill's Market Winners & Losers

The Trump Megabill reinforces the administration’s pro-business stance, prioritizing capital formation, R&D, and domestic manufacturing without introducing new corporate taxes. Instead, it delivers generous tax incentives expected to lower effective tax rates and enhance corporate cash flow. Provisions such as full expensing for equipment and R&D, along with deductions for new manufacturing facilities, are likely to boost corporate cash flow and support equity valuations.

Individual tax cuts, especially for higher-income earners, also provide a tailwind to equity markets by increasing investable income. Together, these measures suggest continued upside for stocks, particularly in sectors directly benefiting from the bill’s provisions.

In contrast, fixed income markets are facing headwinds. Rising national debt and persistent deficit spending are expected to increase Treasury issuance. The higher supply of government bonds may lead to rising yields, which could depress the market value of existing fixed income holdings.

Commodities and energy markets may see mixed effects. The bill promotes fossil fuel production by easing access to public lands and waters, potentially leading to oversupply and weaker oil and gas prices. At the same time, it withdraws federal support for electric vehicles, solar, and wind energy. The expiration of EV tax credits and clean energy incentives represents a significant setback for renewables and may slow the sector’s growth trajectory.

What It Means to MYTHEO Portfolios

1. Growth Portfolio

The Growth portfolio, which consists primarily of equities, is well positioned to benefit from the corporate and individual tax advantages introduced by the Trump Megabill in the short to medium term. Sustained tax savings and improved cash flow, particularly among high-income earners, are likely to support higher market liquidity and investor appetite. Additionally, generous incentives for capital spending and domestic manufacturing are expected to drive robust business expansion, reinforcing the positive outlook for equity performance.

2. Income Portfolio

The Income portfolio may face pressure from rising bond yields, driven by the projected surge in US national debt. Higher yields typically reduce the market value of existing fixed-income holdings, posing a short-term headwind. However, this same environment opens the door to reinvesting in new bonds at more attractive yields, which could significantly enhance future income streams. While elevated yields present a near-term challenge, they also create a compelling opportunity for long-term investors to lock in higher returns and maximize portfolio income going forward.

3. Inflation Hedge Portfolio

The Inflation Hedge portfolio is expected to experience mixed outcomes. The Megabill’s support for fossil fuel extraction may lead to increased supply and potentially softer oil prices, weighing on oil-related holdings such as DBO. Additionally, the abrupt elimination of US federal incentives for clean energy could negatively affect US-exposed assets within ICLN, particularly those reliant on policy support to sustain growth.

However, the portfolio also holds several components that stand to benefit from the broader implications of the Megabill. As an expansionary budget, the Megabill may contribute to upward inflationary pressures. This scenario is favourable for assets that typically perform well in inflationary environments, such as precious metals (gold and silver), real estate, and inflation-protected bonds.

As such, we believe the benefits of these inflation-sensitive holdings outweigh the negatives in the energy and renewables space, resulting in a net positive outlook for the Inflation Hedge portfolio.

4. Essential Portfolio

The Essential portfolio could be among the most adversely affected by President Trump’s Megabill, primarily due to its implications for US energy policy. The proposed elimination of federal incentives for electric vehicles, wind, and solar energy is expected to create significant headwinds for companies with material exposure to the US renewable energy and EV markets.

Four ETFs within the Essential portfolio are particularly exposed: LIT (Global Lithium & Battery Tech), FAN (Global Wind Energy), ICLN (Global Clean Energy), and IXC (US Select Energy). LIT, FAN, and ICLN include companies that rely heavily on policy support for clean energy technologies. With substantial operations or sales in the US, many of these companies may face pressure on growth and valuations due to the rollback of federal support. Without government incentives, they could experience reduced competitiveness, weaker profitability, and more limited capacity to invest in future development.

IXC, on the other hand, presents a different profile. It consists largely of global oil producers that may benefit from the Megabill’s support for fossil fuel production. However, this tailwind could be offset by the potential for global oversupply. If increased domestic output leads to downward pressure on oil prices, the profitability of companies within IXC may come under strain, despite favorable policy conditions.

However, it is important to highlight that all four ETFs are globally diversified. A significant portion of their holdings operate in regions where support for renewable energy, electric mobility, or fossil fuel demand remains strong or is expanding. This global footprint helps soften the impact of US-specific policy changes and adds a layer of resilience to the portfolio.

5. ESG Portfolio

The ESG portfolio may quietly benefit from the Trump Megabill, despite the headline concerns over the rollback of clean energy incentives.

As a predominantly equity-based portfolio, it stands to gain from several market-friendly aspects of the bill. The permanence of individual tax cuts and ongoing support for capital investment are likely to enhance market liquidity, stimulate investor risk appetite, and provide broad momentum for equities.

Moreover, the companies included in MYTHEO’s ESG portfolio are not reliant on subsidies or policy-driven revenue. Instead, they are businesses that integrate environmental, social, and governance principles into their operations, while maintaining strong positions in core sectors such as technology, healthcare, and consumer goods.

In this context, any deregulation of ESG standards in the US may actually benefit these companies. Reduced compliance requirements could lower costs and improve operating margins.