The Trump Administration’s newly released Fiscal Year (FY) 2026 discretionary budget request outlines a significant shift in approach: a return to spending restraint after years of inflated budgets padded by emergency supplementals and expansive programs. The budget proposes $1.691 trillion in discretionary spending for FY 2026, down $139.9 billion—or 7.6%—from the $1.831 trillion enacted in FY 2025. That’s a meaningful reduction, especially in the context of persistent deficits and unsustainable debt levels.
The budget proposes a 22.6% cut to base non-defense discretionary funding, trimming it by $163 billion from current levels to $557 billion. However, the budget also notes that an additional $43.8 billion will be provided for discretionary programs through reconciliation (through this budget process, the spending is considered mandatory rather than discretionary). If enacted, this would provide $601 billion for non-defense discretionary programs.
On the defense side, the budget proposes maintaining base discretionary funding at $892.6 billion, the same level as in FY 2025. However, as with non-defense spending, the Administration assumes that an additional $119.3 billion in defense funding will be enacted through reconciliation and classified as mandatory. If enacted, this would bring total defense resources to $1.01 trillion for FY 2026—a 13.4% increase over the prior year.
While some conservatives have argued that base discretionary defense spending should be even higher, a higher spending level does not necessarily mean smarter spending. The budget ought to propose serious reforms at the Department of Defense to rein in procurement costs, eliminate duplication, and make meaningful progress toward finally achieving a clean audit. The Pentagon recently failed its seventh consecutive audit, underscoring an ongoing breakdown in financial accountability. Taxpayers deserve a military budget that prioritizes efficiency and oversight, not growth for its own sake.
The budget also projects a steep reduction in non-base discretionary funding, which includes categories like emergency spending, disaster relief, and program integrity initiatives. Total non-base funding would fall from $217.8 billion in FY 2025 to $78.0 billion in FY 2026—a 64% decrease.
However, much of this reduction hinges on the assumption that emergency spending will drop by over $120 billion, including a clawback of $2.3 billion. Given recent history—where even “routine” years have brought supplemental bills for natural disasters or military conflicts—this assumption is likely unrealistic. If additional emergency spending proves necessary, lawmakers should ensure that it is offset elsewhere in the budget to maintain fiscal discipline and hold the line on discretionary outlays.
The proposal also would reduce IRS funding by $2.5 billion to $9.8 billion while making encouraging statements about restoring the IRS as a service-oriented agency that treats all taxpayers fairly. After recent concerns about heavy-handed enforcement, the budget states, “The President’s Budget restores IRS as a neutral arbiter that will no longer use weaponized enforcement and overzealous rules against the American people.”
Many of the burdensome regulations implemented during President Joe Biden’s administration—such as the weakened rules for supervisory approval of tax penalties—are now under review. The budget specifically acknowledges the problems caused by the lowered 1099-K reporting threshold of $600, which has created confusion and unnecessary compliance burdens for casual users of payment platforms like Venmo and Cash App. This threshold was established under the American Rescue Plan Act, delayed twice by the IRS, and was implemented by the Service at its own invented, non-statutory threshold of $5,000 for this year’s tax filing—a move that raises serious concerns about the agency’s authority to override clear legislative language. Reforming policies like these—with supporting legislation where necessary—is essential to rebuilding taxpayer trust and ensuring the IRS focuses on service over surveillance.
On paper, this “skinny” budget charts a more sustainable course for discretionary spending than taxpayers have seen in recent years. The President is also expected to submit a rescissions package to Congress that would help lock in savings tied to recent executive actions aimed at rooting out wasteful programs. Moving forward, lawmakers must resist the temptation to undermine these efforts through unfunded emergency supplementals. If the Administration follows through on these principles as the full federal budget is released, it will mark a welcome shift for taxpayers—and a blueprint worth building on.