The Distributional Incidence of U.S. Federal Fiscal Policy, FY2000–FY2025: Trend, Departure, and the Bottom 50%

The Distributional Incidence of U.S. Federal Fiscal Policy, FY2000–FY2025: Trend, Departure, and the Bottom 50% | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Distributional Incidence of U.S. Federal Fiscal Policy, FY2000–FY2025: Trend, Departure, and the Bottom 50% Andy Salazar This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9118792/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract The combined fiscal burden of tariff escalation, means-tested spending cuts, and interest crowding on the bottom 50% of the U.S. income distribution reached $ 1,331 per person (10.6% of pretax income) in FY2025—an amount comparable to total means-tested transfer income separating B50 households from their market-income baseline. I embed FY2025 within a 26-year panel (FY2000–FY2025) of CBO budget data, Treasury administrative records, and CPS ASEC microdata (1.4 million person-records) and use out-of-sample prediction tests to classify each distributional channel as either a departure from its historical trajectory or a continuation of pre-existing trends. Two channels register as statistically significant departures: customs revenue’s share of total revenue jumped from 1.0% to 3.7% (z = 25.8), and the interest-to-safety-net crowding ratio doubled to 0.91 (z = 2.4). Two others—the regressive revenue share and the safety-net outlay share—remain within their quarter-century trajectories. The channels classified as departures are precisely those that burden the bottom 50% most heavily. Whether these departures prove temporary or permanent cannot be assessed from a single post-departure observation; this paper identifies them, traces their distributional incidence, and distinguishes them from secular trends that require fundamentally different policy responses. Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-9118792","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":606040961,"identity":"7de4c460-0b7c-4f42-98fa-bb9a885b6408","order_by":0,"name":"Andy Salazar","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAzElEQVRIiWNgGAWjYBACNgbGBwwf2KC8BOK0MBswzmBjkCBeCwNQCzMPTAtRgE+6mfGxTZldHX8D78MPD3fUMfC3d+O3jE3mMLNxzrlkCYkD7MYSiWcOM0icObsBvxaJ/GPSuW3MEgz3nzFIJLYdYDCQyCWkJZlN2rKtXkL+ABvzj8S2OiK1MLYdljA4wMYGtIWZKC3Mhj3njktuBGqxSGw7zEPQL/Izkhkf/Cir5pcDOuzmz7Y6Of72XvxaMAAPacpHwSgYBaNgFGAFAO8MOxL0nvrDAAAAAElFTkSuQmCC","orcid":"","institution":"","correspondingAuthor":true,"prefix":"","firstName":"Andy","middleName":"","lastName":"Salazar","suffix":""}],"badges":[],"createdAt":"2026-03-14 01:25:53","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-9118792/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-9118792/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":105562705,"identity":"aba7c53c-fc2c-4f9f-b828-5e9353914017","added_by":"auto","created_at":"2026-03-27 12:44:13","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":2586825,"visible":true,"origin":"","legend":"","description":"","filename":"SalazarFiscalBreaks2026v5.pdf","url":"https://assets-eu.researchsquare.com/files/rs-9118792/v1_covered_8ff01a94-6d0d-4519-977f-860eb5c6fef3.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"The Distributional Incidence of U.S. Federal Fiscal Policy, FY2000–FY2025: Trend, Departure, and the Bottom 50%","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"","lastPublishedDoi":"10.21203/rs.3.rs-9118792/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-9118792/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThe combined fiscal burden of tariff escalation, means-tested spending cuts, and interest crowding on the bottom 50% of the U.S. income distribution reached \u003cspan\u003e$\u003c/span\u003e1,331 per person (10.6% of pretax income) in FY2025\u0026mdash;an amount comparable to total means-tested transfer income separating B50 households from their market-income baseline. I embed FY2025 within a 26-year panel (FY2000\u0026ndash;FY2025) of CBO budget data, Treasury administrative records, and CPS ASEC microdata (1.4\u0026nbsp;million person-records) and use out-of-sample prediction tests to classify each distributional channel as either a departure from its historical trajectory or a continuation of pre-existing trends. Two channels register as statistically significant departures: customs revenue\u0026rsquo;s share of total revenue jumped from 1.0% to 3.7% (z\u0026thinsp;=\u0026thinsp;25.8), and the interest-to-safety-net crowding ratio doubled to 0.91 (z\u0026thinsp;=\u0026thinsp;2.4). Two others\u0026mdash;the regressive revenue share and the safety-net outlay share\u0026mdash;remain within their quarter-century trajectories. The channels classified as departures are precisely those that burden the bottom 50% most heavily. 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