The House Speaker speaks to the media after a brief passing of a budget bill that would transfer the budget bill by the House on May 22, 2025, at the U.S. Capitol in Washington.
Kevin Dietsch | Getty Images
The vast Legislative Package House Republicans passed Thursday are in stark contrast between seniors and low-income households.
The majority of the financial benefits in the law, known as “one big beautiful bill act,” flows to the wealthiest Americans, courtesy of tax cuts measures aimed at business owners, investors and homeowners in high-tax areas, experts said.
But low-income earners will get worse, they said. That’s largely because Republicans partially offset these tax cuts by reducing social safety net programs such as Medicaid and the Supplementary Nutrition Assistance Program.
The tax and spending package is now heading towards the Senate and could face more changes.
“It’s pretty badly distorted for the wealthy.”
The Congressional Budget Office, a nonpartisan federal scorekeeper, estimates that the bill will decline by 2% in 2027 and 4% in 2033 as a result of changes to the bill.
In contrast, the top 10% of people will increase their income from the law. There was a 4% in 2027 and 2% in 2033, the CBO found.
A similar dynamic was found in the Yale Budget Lab analysis.
Yale estimates that annual income will drop by on average for the fifth household of the year when annual income falls around $800 in 2027.
The top 20% earning more than $128,000 a year will average an increase of $9,700. The top 1% win $63,000.
Yale and CBO’s analysis do not consider last-minute changes to the House Act, including more stringent work requirements for Medicaid.
“It’s pretty badly skewed into the wealthy,” said Ernie Tedeski, former chief economist, director of economics at the Yale Budget Lab at the White House Council of Economic Advisers during the Biden administration.
The law exacerbates the regressivity of the Trump administration’s recent tariff policies, economists said.
“If you’re built in [Trump administration’s] On customs hikes, this will be even more distorted against lower and working class families,” Tedeski said.
Most invoice tax cuts are sent to top households
There are several reasons why the House is distorted towards the wealthiest Americans, experts said.
Among them are more valuable tax credits related to business income, state and local taxes, and real estate taxes, experts said.
Experts said these tax credits are disproportionately flowing to high-income earners. For example, the bottom 80% of income earners will not benefit from the House proposal to raise their salt caps to $40,000 from the current $10,000.
More details from personal finance:
Tax Act includes a $1,000 baby bonus on your “Trump Account”
House bill raises the maximum child tax credit to $2,500
Food Stamps face “the biggest cut in the history of the program”
The bill also holds a 37% lower tax rate set by the 2017 Tax Cuts and Employment Act.
It kept the tax credits intact that allow investors to protect capital gains from tax by focusing their money on the “opportunity zone.”
Trump’s 2017 tax law created a tax credit with the aim of encouraging investments in low-income areas designated by the governor. According to the Tax Policy Centre, taxpayers with capital gains are “very concentrated” among the wealthy people.
According to the Tax Policy Center, 60% of the bill’s tax cuts will be passed to the top 20% of households, with over a third of those making more than $460,000 or more.
“The fluctuations between income groups are impressive,” the analysis states.
Why are many low-income people getting worse?
That said, if the bill was enacted, more than eight of 10 households would receive tax cuts in 2026, the Tax Policy Center discovered.
Lower income earners have increased their higher levels of deductions and temporary child tax credits, strengthening their tax benefits, and have received various tax benefits from tax credits linked to income and car loan interest, for example, experts said.
However, some of these benefits may not be as valuable as it looks, experts said. For example, about a third of leading workers do not pay federal income taxes, Tedeski said. They will not benefit from the proposed tax credit. It is structured as a tax credit and does not benefit households that do not pay taxes.
Meanwhile, low-income households relying on the federal safety net program look at benefits related to Medicaid, SNAP (formerly known as Food Stamps), and student loans and Affordable Care Act premiums, says Kent Smutters, an economist and faculty member for the Penn Wharton budget model.
For example, the House bill imposes labor requirements on Medicaid and SNAP beneficiaries. Analyses by the Congressional Budget Office show that total federal spending on these programs will decrease by approximately $700 billion and $267 billion, respectively, through 2034.
It said, “If you’re low-income and don’t get support from Snap, Medicaid or ACA Premium, you’ll be a little better,” Smetters said.
Some high-income earners will pay more taxes
In a sense, it may not be surprising that most tax benefits arise in the wealthy.
The United States has one of the most progressive tax systems in developed countries, Smetters said.
The top 10% of households pay around 70% of all federal taxes, he said. Such households will earn around 65% of the total amount of the law, according to a Penn Wharton analysis released Monday.
According to the Tax Policy Center, a subset of high-income earners (17% of the top 1% of households making at least $1.1 million a year) will actually pay taxes.
“This is because some pass-through companies are limited to the ability to fully deduct state and local taxes and the limits on all deductions for top bracket households,” wrote Howard Greckman, a senior fellow at the Center for Tax Policy.
