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

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.