A Framework to Evaluate Affordability Proposals

U.S. families are grappling with increased costs for many necessities: groceries, housing, health care, utilities, gasoline, and more. Although Donald Trump pledged as President that he would improve affordability, he has failed on that mark. Instead, he is championing policies that have undermined affordability, including imposing sweeping taxes on imported goods and making enormous cuts to food assistance and health care. And he is proposing still more cuts in his 2027 budget, including reducing the number of low-income households that get help paying rent and sharply cutting the fruit and vegetables that low-income expecting and new parents and young children can afford through WIC.

People routinely cite “affordability” as their top concern in public opinion polls.^[1] Given the need for affordability and the Trump Administration’s failure to adopt policies improving it, numerous proposals covering policy issues ranging from housing to energy to junk fees to tax cuts have received attention. The quantity and breadth of proposals, however, may make it difficult for policymakers to determine which to prioritize.

We have developed two questions policymakers should ask when evaluating policy proposals aimed at improving affordability:

• Does the proposal effectively make a meaningful difference for the families who struggle the most with affordability?
• Does the proposal have large fiscal opportunity costs?

Making a meaningful difference. A wide array of evidence shows that families whose incomes are at the bottom of the income distribution struggle the most to afford basic goods and services. A basic mark of how successfully a policy addresses affordability is whether and how much it helps families with low and moderate incomes.

To meet this threshold, an affordability proposal should make a meaningful difference in the lives of these households. In particular, proposals that address the cost of items these families spend a large percentage of their budget on, like housing and health care, are worth prioritizing, as are those that make important aspirations like education more affordable. Other policies, like raising the minimum wage or expanding the Earned Income Tax Credit (EITC) and Child Tax Credit, that meaningfully raise families’ incomes also are worthy priorities because they allow families to buy more of the goods and services that are important to them.^[2]

And a proposal must actually work. Some policies may sound like they could improve affordability, but further analysis or a closer look at the evidence may show they are ineffective. For example, exempting tips from income taxation may sound like it could make a significant difference for low-paid workers’ take-home pay, but in reality, it benefits fewer than 5 percent of these workers. Fortunately, strong evidence does back some policies’ track record of success, such as expanding access to affordable health coverage.

Fiscal opportunity costs. Some ideas to address affordability, such as relaxing zoning restrictions or raising the minimum wage, may have little or no direct fiscal costs to the federal government, though they could have other costs (something this report does not explore).

But other ideas that cost the government money — whether through forgone tax revenue or higher spending — can have opportunity costs since policymakers are unlikely to enact policies that add tens of trillions to deficits. And while proposals can be offset through tax changes, there will be competition for those pay-fors. Even when legislators have recently enacted deficit-financed legislation, like the Trump tax cuts or the American Rescue Plan, they imposed overall limits on the size of these packages.

If the Trump Administration continues to be unwilling to meaningfully improve affordability, an ambitious policy agenda will likely fall to the next President. Key proposals will include reversing various Trump policies, including the 2025 cuts in health coverage and food assistance; alone, reversing these would cost more than $2 trillion over the decade 2030-2039. There also will be strong interest in expanding access to health coverage and helping more families afford child care, rent, and other necessities. At the same time, some elected officials may want to consider more tax cuts, such as extending new expiring tax cuts that were part of the 2025 reconciliation legislation or attempting to enact new, broad-based middle-class tax cuts.

The U.S. has substantial capacity to raise hundreds of billions in additional annual revenue beyond current levels, particularly by raising taxes on profitable corporations and high-income households. Our ability to raise revenues presents an important opportunity to meet a variety of critical national goals. We can use new revenues to make investments that will make life more affordable for millions of families and individuals, finance important national needs such as medical research and infrastructure, address challenges such as the clean energy transition and the growth of artificial intelligence, and begin to make our fiscal trajectory more sustainable without making devastating cuts to essential programs and services.

But how best to use that revenue will be an important question. Recent revenue-raising proposals — both those that were enacted, like those in the Inflation Reduction Act and the Affordable Care Act, and those that were not, like the revenue increases in the Build Back Better legislation — have not raised enough to cover all of the affordability proposals and priorities that have been discussed in recent months. Policymakers will thus need to both aggressively raise additional revenue and prioritize how to best use it.

Finally, the Administration’s tariffs are driving up consumer prices and input costs for businesses; they are a regressive tax that also hurts businesses and distorts the economy in inefficient ways. They have boosted revenue, however. Undoing the tariffs that are in place today (including temporary ones that the Trump Administration is currently working to replace with a long-term alternative) would reduce federal revenue by an estimated $2.3 trillion over the decade beginning with the next President’s term. While the legal situation of these tariffs remains uncertain, if either the courts or the next President undo the tariffs, deficits will rise further.

Ultimately, the U.S.’s current fiscal trajectory is unsustainable. More revenues will be needed to bring down deficits and address our significant investment needs, including those that reduce costs and help families afford the basics. That underscores the importance for policymakers to ambitiously raise revenue while also prioritizing affordability policies that are effective and benefit the households with the most significant challenges paying for housing, health care, food, utilities, and child care.

This framework can help policymakers set priorities and identify the most promising plans as they evaluate dozens of policy proposals. The paper provides more detail on each question and briefly answers how these two questions apply to some example policies.

Question 1: Does the proposal effectively make a meaningful difference for the families who struggle the most with affordability?

This question is intended to provide a framework for evaluating a policy’s effects on affordability separate from fiscal effects.

First, who benefits from the policy matters. Data clearly show that people with low and moderate incomes struggle the most to afford the basics. One way to see this is who struggles most to pay their bills.

Three times as many households with incomes in the bottom half of the annual income distribution as households with incomes in the top half reported either experiencing food insecurity or not being able to pay their rent, mortgage, or utility bill in 2023 (the most recent available data).^[3] (See Figure 1.)

Looking at specific costs, families with low incomes clearly struggle the most. For example, more than 90 percent of renter households that pay more than half of their incomes for rent have very low incomes (meaning their income is less than 50 percent of the area median income).^[4] Similarly, 1 in 3 households with incomes below 185 percent of the federal poverty line faced challenges affording food in 2024, while just 8 percent of households with incomes above this level were food insecure.^[5] See Appendix 1 for more data on who struggles to afford basic necessities.

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Another way to see who faces the greatest affordability challenges is to look at which families lack sufficient savings on hand to get through a crisis such as a job loss or illness. Among adults with incomes below $50,000, fewer than 1 in 3 have enough emergency savings set aside to cover three months of expenses, compared with 2 in 3 among adults with incomes above $50,000, in data for 2024.^[6] This difference is also visible by race: fewer Black (41 percent) and Hispanic (44 percent) adults can afford three months of expenses than white (60 percent) or Asian American (69 percent) adults. ^[7]

Second, once the policy meets the threshold of benefiting families with low and moderate incomes, then policymakers should consider the magnitude of difference it makes. One way a policy can improve affordability is to reduce low-income families’ costs for the goods and services they spend a large share of their incomes on. It is difficult for families to spend less on many of these items, like groceries, so bringing down costs for these large categories can make a dramatic impact on their budgets.^[8] Reducing the cost of items that are occasional purchases, like concert tickets, does not.

Necessities make up the lion’s share of the budget for families with lower incomes, 2024 Bureau of Labor Statistics data show.^[9] Households with incomes in the bottom half of the distribution, or less than $74,000 a year, spend on average $6 out of every $7 – or 86 percent of their income – on basic items in five key areas: utilities, groceries, health care, transportation, and shelter. (See Figure 2.) Many lower-income families don’t have children or pay for child care, but for those who do pay for child care, this constitutes another significant expense.

Households with incomes in the top half of the income distribution, on the other hand, spend only 36 percent of their income on these basic items. These categories do not include other essentials, such as clothes or household items like diapers, paper towels, and cleaning supplies.

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Reducing costs on more minor items for families with low incomes would do little to improve affordability for them. For example, only about halfof people flew at all in 2023 — meaning the other half spent $0 on flights — and only half of people making under $50,000 reported flying even once between 2019 and 2023.^[10] To be sure, reducing the cost of air travel could make it accessible to more people and policymakers should consider policies that reduce the cost of flying, such as making airline markets more competitive, as long as they do not have large fiscal opportunity costs (as discussed below). At the same time, policymakers should understand that reducing air travel costs or other items that families who struggle to afford the basics rarely use or spend little money on will not help them.

A recent New York Times poll helps illuminate the items whose affordability most concerns people in the U.S. The top three specific items were housing (25 percent), health care (16 percent), and food (8 percent), accounting for about half of all respondents (another 16 percent responded with “nothing” and another 8 percent mentioned “basic needs/cost of living/bills”).^[11]

Increasing people’s incomes is an important way of making life more affordable without bringing down the costs for a specific item. This can take the form of raising their pre-tax incomes (such as by increasing the minimum wage) or boosting their after-tax income, such as expanding the Earned Income Tax Credit and Child Tax Credit. An important advantage of these policies is that they let families spend money on the items they value the most. But such changes will not realistically make certain items like cancer treatment or a four-year college degree affordable; only policies that directly reduce the cost of such items can make them affordable.

Finally, the policy must actually work. A policy like exempting tipped income from income taxes may sound like it benefits low-paid workers, but over one-third of low-paid tipped workers do not receive $1 of benefit because they already do not pay income taxes – and the exemption benefits the highest-earning tipped workers (like servers in high-end restaurants) more than lower-earning tipped workers (like servers in low-cost table-service restaurants).^[12]

Similarly, proponents justify policies that take away benefits from people who cannot meet a work requirement as leading more people with low incomes to find jobs, but the evidence shows that they mostly take away help from people who need it — including people between jobs, people who should be exempt because of health conditions, and people who are working but the red tape knocks them off the program — often without any noticeable increase in employment.^[13]

Fortunately, we have ample evidence that certain policies do work. Policymakers should, therefore, prioritize them:

• Housing: Federal rental assistance helps households that include nearly 10 million people afford decent, stable housing. Research shows that Housing Choice Vouchers, the most widely used form of rental assistance, sharply reduces housing instability and overcrowding and cuts homelessness by three-fourths.^[14]
• Groceries: Evidence shows that SNAP participation reduces food insecurity by as much as 30 percent. It is even more effective among children and those facing very low food security.^[15]
• Health care: Medicaid saves lives, with one study estimating that the Medicaid expansion included in the Affordable Care Act saved over 27,000 lives between 2010 and 2022, while decisions not to expand in the remaining non-expansion states cost almost 13,000 lives.^[16] Expanding Medicaid has also been linked with fewer unpaid medical bills, improved credit scores, higher satisfaction with one’s financial situation, lower catastrophic health expenditure risk, and fewer evictions and bankruptcies.^[17]
• Education: College aid policies can help make college affordable. Grant aid – mostly federal and state – lowered the average cost of attending a public four-year college to $21,000 a year in 2025, from $31,000 without grant aid (and lowered the cost of a public two-year college to $16,000, from $21,000)^[18] and increased the likelihood of completing a degree.^[19]

Question 2: Does the proposal have large fiscal opportunity costs?

There are many potential ways to make life more affordable for families, but it is important to know whether enacting one policy might crowd out others that could even more effectively address affordability challenges – or make it harder to make other much-needed investment in areas like clean energy transition or medical research. Some affordability ideas, such as relaxing zoning restrictions or raising the minimum wage may have little or no direct fiscal costs and minimal fiscal tradeoffs against other policies, though they could have other tradeoffs (something this report does not explore).

Policies that have fiscal costs, however, do trade off against one another because lawmakers set some overall fiscal limit on legislation, whether for economic or political reasons. Even deficit-financed legislation like both sets of Trump tax cuts and the American Rescue Plan needed to cost under a certain amount to secure key votes, and much of the haggling over them involved both the overall cost limit and how to fit within the limit once imposed. Policymakers, therefore, need to evaluate whether a policy proposal’s fiscal costs could impede other policies that would make a more meaningful difference to families facing the most significant affordability challenges.

New Revenues Critical to Investing in Affordability Measures

Fortunately, the United States has substantial ability to raise revenues above current levels, which would allow it to finance affordability policies and other investments. This opportunity can enable us not just to make life more affordable for millions, but meet our commitments to seniors, make high-value investments that will improve well-being and broaden prosperity, and improve our fiscal outlook. This revenue could also be central to solutions to addressing emerging challenges such as the clean energy transition and the growth of artificial intelligence.

By multiple metrics, the U.S. has ample capacity to raise taxes. For example, the U.S. collected federal, state, and local tax revenue equal to 26 percent of its economy in 2024, which ranks it 31 among 38 advanced industrial countries in the OECD and far behind Canada (35 percent), Australia (30 percent), Japan (34 percent), and New Zealand (33 percent).^[20] Raising federal revenue by an additional 8 percentage points to place the U.S. at the GDP-weighted OECD average (34 percent) would raise $36 trillion from 2030 to 2039, the budget window that will face the next President.^[21] Even raising it by half this amount would leave the overall U.S. tax rate in the bottom third of OECD countries. Moreover, the higher levels of pre-tax inequality in the U.S. relative to other OECD countries would allow it to raise a larger share of revenue from the highest-income households.

Another way to see the ample room available for raising revenue is to look at Congressional Budget Office (CBO) projections prior to successive rounds of deficit-financed tax cuts. The CBO projected in 2012 — before most of the Bush tax cuts were made permanent and the Trump tax cuts were even conceived — that the U.S. would collect 21.6 percent of GDP in federal revenue in 2025 (this is lower than the OECD number above because it does not include state and local tax revenue). In the 2012 CBO projection, the U.S. would run a surplus and eventually pay off its debt because this revenue would be more than enough to keep pace with projected spending (actual federal programmatic spending as a share of the economy in 2025 was lower than CBO projected in 2012) and continue to grow.^[22] Importantly, this level of revenue was consistent with continued real GDP growth — in fact, CBO in 2012 projected annual real GDP growth of 2.2 percent in the decade beginning in 2026 compared with 1.8 percent in current projections at a lower revenue level.^[23]

Collecting 21.6 percent of GDP in federal revenue over the 2030-2039 budget window would raise $17 trillion over the decade relative to current CBO projections. It should be noted that the federal government never collected revenues equal to 21.6 percent of GDP – most of the Bush-era tax cuts were extended and then subsequent tax cuts enacted before revenues reached that level. In 2000, revenues peaked as a share of GDP at 20.0 percent. Getting back to this level would raise $10 trillion over the 2030-2039 window.

We can and should raise significant revenues and use those resources to invest in building a stronger country and improving affordability (see text box). Doing so will require significant political will as recent revenue-raising efforts, both successful and unsuccessful, have been far more modest than the levels now needed:

• In 2021 the House of Representatives passed the Build Back Better Act, which would have raised $1.6 trillion in revenue from high-income households and profitable corporations over ten years. (The equivalent figure over the 2030-2039 budget window facing the next President would be $2.3 trillion.)^[24]
• Build Back Better’s tax increases faced opposition in the U.S. Senate, which opted instead to raise $470 billion in new revenue over ten years in 2022’s Inflation Reduction Act. (The equivalent figure over the 2030-2039 budget window would be about $700 billion.)^[25]
• The 2010 Affordable Care Act raised $440 billion in revenue over ten years as scored at the time. (The equivalent would be $1.1 trillion over the 2030-2039 budget window.)^[26]
• The 1993 deficit-reducing reconciliation legislation raised the equivalent of roughly $3.3 trillion in revenue over the 2030-2039 budget window. (CBO only provided five-year scores at the time.)^[27]

Policymakers Face Competing Priorities

We can and should raise significant revenues. Nevertheless, policymakers are almost surely going to have to prioritize among competing affordability proposals as well as between affordability proposals and other types of investments.

Here are some types of affordability proposals policymakers have proposed:

Reversing Trump Anti-Affordability Policies

Congress has enacted deep cuts in food assistance and health coverage that have exacerbated affordability challenges for low- and moderate-income families. The full cost of reversing last year’s cuts to health coverage and food assistance would be $2.2 trillion over the 2030-2039 period and reinstating the Affordable Care Act’s premium tax credit enhancements that Republicans allowed to expire at the end of 2025 would cost $460 billion over that same period. Reversing the Trump tariffs and backfilling those revenues would require another $2.3 trillion. (See Figure 3.)

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New Affordability Proposals

Many households struggled to afford the basics before President Trump took office, so just undoing harmful cuts (or something similar at the same cost) will not be enough to address those pre-existing challenges. Many policies could ease affordability challenges — and policymakers must weigh their benefits, targeting, and costs.

For example, an EITC or a Child Tax Credit expansion focused on low- and moderate-income families and investments in rental and child care assistance could provide significant help to families with the greatest struggles.

Broader proposals, such as recent tax proposals that provide substantial benefits to a broad swath of both lower-, middle-, and even upper-middle-income families, can deliver help to the families with the greatest affordability challenges if they are designed correctly, but they are very costly because they benefit a much larger group of people.

For example, proposals from Senators Chris Van Hollen and Cory Booker are aimed at exempting a large share of middle-income households from paying federal income taxes. While the proposals differ in important ways affecting how much they benefit low-income families, they are both costly. The Van Hollen proposal costs $1.5 trillion and the Booker proposal costs $5 trillion over ten years.^[28] Both senators have suggested offsets for these tax cuts, but those offsets are part of the same pool of revenue-raisers policymakers will need to consider using for undoing the harm from various Trump policies and other new investments.

Too many families struggle to afford the basics and we can afford to address those issues with smart revenue raisers. Given the needs facing the nation, prioritizing policies that most effectively help those with large challenges will be key.

Extending Expiring Tax Cuts

Last year’s Republican reconciliation law made several tax cuts that expire after 2028 and 2029, including new exemptions for tipped and overtime income, an income tax deduction for seniors, and an increase in the amount of state and local taxes households can deduct from $10,000 to $40,000. All of these provisions provide minimal benefits to households with incomes in the bottom 20 percent of the income distribution, and the increase in the state and local deduction almost exclusively benefits households with incomes in the top 20 percent.^[29] Nevertheless, policymakers from both parties have expressed support for some or all of them; extending all of them would cost about $1.2 trillion over the 2030-2039 budget window.^[30]

This arithmetic highlights the need for policymakers to be aggressive in raising revenue to finance investments that will make life more affordable. But it also highlights the need to prioritize because proposals with large fiscal costs that provide small benefits to low- and moderate-income families could block investments that are far more effective in addressing the affordability challenge families face.

One component of prioritization is pursuing policies without significant fiscal costs when available to preserve fiscal resources for other solutions. For example, families throughout the income distribution struggle to afford housing, and policies around zoning, permitting, and other regulatory changes could substantially reduce costs for middle-income families without large fiscal costs. But those policies on their own will not keep families with low incomes housed and cannot substitute for rental assistance. It therefore makes sense to pursue rental assistance policies focused on low-income families while using largely non-fiscal policies to help middle-income families afford housing.

Using This Affordability Framework to Evaluate Policy Proposals

Policymakers can use these two basic questions to evaluate affordability proposals over the coming years.

For example, an executive action indexing capital gains for inflation would cost $1 trillion over a decade, while almost all of the gains would accrue to households with incomes in the top 20 percent.^[31] It would do nothing for low- and moderate-income families but would use critical revenue, thereby making it much harder to pass policies that would improve affordability for that group. It therefore fails the test on both marks.

Sen. Booker’s plan to increase the standard deduction while expanding the EITC and Child Tax Credit, on the other hand, would make an enormous difference for low- and moderate-income families as a result of those refundable credit expansions. But the $4 trillion net cost of the standard deduction increase, which Sen. Booker’s plan would partially offset by raising tax rates for married couples making over $512,000, could make it more difficult to pursue other important priorities like reversing Trump’s cuts to health care, investing in clean energy transition, or helping workers facing a challenging job market because of AI. And the standard deduction increase, unlike the boosts to the EITC and Child Tax Credit, would do very little to increase income for households with incomes at the bottom of the income spectrum. Overall the proposal would make a meaningful difference for low- and moderate-income families, but policymakers should be wary of the cost of increasing the standard deduction.

Reversing Trump’s cuts to SNAP passes both tests. It would keep families with low incomes from facing a growing affordability crunch as a result of losing assistance for buying groceries. And at a cost of around $200 billion over a decade, lawmakers could offset the cost with relatively modest policies like, for example, restoring the top tax rate to 39.6 percent.

Reinstating the ACA premium tax credit enhancements also passes the test — it helped increase marketplace enrollment among people with incomes between 100 and 200 percent of the federal poverty level by 143 percent.^[32] The roughly $460 billion cost over the 2030-2039 budget window could be addressed by closing the Medicare tax loophole for high-income business owners or reversing President Trump’s estate tax cut while closing estate tax loopholes.

There are also policies that would make life more affordable for low- and moderate-income families and have essentially no or even negative fiscal costs. Raising the minimum wage, for example, has minimal fiscal costs but can make an important difference for households with workers in low-paid jobs.^[33] Going a step further, reforms to how Medicare compensates providers (known as site-neutral payments) or pays for prescription drugs save both the federal government and beneficiaries money. These policies score highly under this framework — saving higher-income families money and creating fiscal space for policies that can directly benefit lower-income families.

Appendix 1

Here is a look at how families with low incomes struggle more than families with higher incomes to afford the basics:

• Housing: More than 90 percent of renter households that pay more than half of their incomes for housing have incomes below half of their area’s median income
• Groceries: Households with incomes below 185 percent of the federal poverty line ($59,900 for a family of four with two children) are over four times more likely to be food insecure – meaning they had difficulty acquiring food due to lack of resources – than higher-income households (33 percent versus 8 percent in 2024).^[34]
• Health care: Adults in households with annual income under $40,000 are more likely (53 percent in 2025) than those in households with income over $90,000 (30 percent) to report difficulty affording health care costs.^[35]
• Energy: Households with incomes below the federal poverty level are more likely than others to face severe energy cost burdens. They spend an average of 20 percent of their income on home energy bills, while households with incomes above twice the poverty level spend an average of 4 percent of their income.^[36]
• Child care: Among families that paid for child care in 2023, the half with the lowest incomes spent 11 percent of their monthly income on it, compared with 5 percent for the half of families with the highest incomes.^[37] And these statistics ignore the many families with lower incomes who do not pay for child care — even if it would allow them to increase their incomes — because they cannot afford it.^[38]