Which major spending programs or tax changes enacted in 2024–2025 contributed most to the 2025 deficit?
Executive summary
Fiscal 2025’s $1.8 trillion deficit reflected a mix of higher mandatory and discretionary outlays, one-off timing effects that make year-to-year comparisons tricky, and tax-policy shifts that both raised and lowered revenue; the biggest upward pressures were higher spending on defense and veterans’ programs and rising outlays for refundable tax credits, while tax-law changes—particularly retroactive business expensing and other provisions in the 2024–2025 tax-and-spending package—reduced corporate receipts even as new tariffs boosted customs revenue [1] [2] [3] [4].
1. Defense and veterans: steady increases in base spending that mattered
Spending by the Department of Defense rose materially in 2025—CBO reports DoD outlays up by roughly $27–34 billion in various monthly reviews, driven mainly by operations and maintenance and procurement—and the Department of Veterans Affairs also recorded a large increase (about $23–40 billion over comparable periods), making both among the largest contributors to higher outlays in the year [5] [6] [7].
2. Refundable tax credits: the invisible spending program that added billions
Outlays for refundable tax credits—including premium tax credits (ACA marketplace subsidies), the earned income tax credit, the child tax credit and other refundable benefits—rose sharply in 2025 and were repeatedly cited by CBO as a major outlay driver; CBO tallied increases of roughly $22–26 billion in some months and flagged an 18–29 percent year‑over‑year swing for specific periods tied to enrollment and program expansions [5] [6] [2] [8].
3. Legislative tax-and-spending changes: short‑term revenue shifts, medium‑term deficit costs
The major 2024–2025 package (referred to in reporting as H.R.1/OBBBA and related bills) combined tax cuts and spending increases whose near‑term effects were mixed: while CBO and analysts note some student‑loan savings reduced FY2025 deficits slightly, the package’s retroactive full expensing and R&D deductions slashed corporate tax collections—contributing to a roughly $79 billion drop in corporate receipts in FY2025—so the law’s net effect was to add to deficits over the decade even if some provisions temporarily lowered 2025 outlays [4] [3] [9].
4. Tariffs and customs duties: an unconventional offset
A politically driven rise in tariffs produced unusually large customs revenue in FY2025—CBO and Treasury data show customs duties and tariff measures added materially to receipts, with some sources attributing over $100 billion of the revenue increase to tariffs in the year—partially offsetting revenue losses from corporate receipts and tempering the headline deficit [1] [10] [7] [3].
5. Timing effects and one‑time items that distort the headline
CBO repeatedly warns that shifts in the timing of payments and postponed tax deadlines—payments moved from October 1, 2023 into other months and tax‑deadline postponements from 2023 to 2024—artificially boosted 2024 receipts and reduced 2024 outlays, making 2025 look relatively smaller; CBO quantifies timing adjustments in the tens of billions and says the deficit would have been materially different absent those shifts, so some of what appears to be “new” 2025 spending is a timing artifact [1] [6] [11] [12].
6. Where the debate concentrates and limits in the record
Analysts diverge: deficit hawks emphasize the long‑run cost of the 2024–2025 tax‑and‑spending law and persistent discretionary growth (CRFB and CBO summaries), while supporters point to tariff revenue and one‑time timing effects that improved the 2025 headline deficit [4] [10] [3]. The sourced reporting documents most of these channels, but it does not provide a single dollar‑by‑dollar attribution of the full $1.8 trillion shortfall to each law or program in a way that fully isolates interactions; CBO’s monthly reviews and Budget and Economic Outlook provide the closest, incremental accounting [1] [9].