The American Legion said in a statement Thursday that money that will be spent on an upcoming military parade "would be better spent fully funding the Department of Veteran Affairs and giving our troops and their families the best care possible".
Reports emerged earlier Thursday that the cost of the parade went over budget by $80 million, an unnamed official told CNBC.
The ceremony is said to be largely inspired by Trump's front-row seat at France's Bastille Day military parade in Paris.
US military parades usually only happen at the end of major wars. "It was a tremendous day, and to a large extent because of what I witnessed, we may do something like that on July 4 in Washington down Pennsylvania Avenue", Trump said.
Officials said the plans had not yet been approved by Defence Secretary James Mattis.
Earlier on Thursday, a U.S. official told the AFP news agency the planning estimate for the event had ballooned to as much as $92m (£72m). It also was expected to involve a number of military aircraft flyovers.
Since that time, cost estimates have skyrocketed upwards of $90 million.
A memo at the time said no tanks would be used so as not to damage the roads of the nation's capital. Lawmakers have questioned the cost and necessity of such a show of force, comparing it to high-profile military demonstrations in countries such as North Korea. His staff is planning the parade along a route from the White House to the Capitol, and would integrate it with the city's annual veterans' parade.
The U.S. has not held a major military parade in Washington since 1991 to mark the end of Operation Desert Storm. The focus was to be on the work of United States military veterans through the ages, starting with the American Revolutionary War.