Trump Mega Bill Winners and Losers
The so-called “Big Beautiful Bill” is now law. At nearly 900 pages, there is plenty to absorb, but the bottom line is that the legislation is primarily a tax cut for the wealthy, that will disproportionately hurt lower-income families by slashing Medicaid, the health insurance plan for 70 million lower income Americans, and the Supplemental Nutrition Assistance Program (“SNAP” formerly known as food stamps), which provides food and nutrition for more than 40 million Americans.
The problem with a massive piece of legislation like this is that there really is something for everyone, but there’s just a lot more for wealthier folks than those in the middle or at the bottom of the income and wealth ladder.
Lower-Income Earners Lose the Most
Let's start with the folks who can least afford to get squeezed. The Penn Wharton Budget Model finds that the bottom 20 percent of households (those earning less than $18,000) would see their income reduced by 2.9 percent, or about $885 in 2030. The reason is that many of these people are not paying much in federal income taxes to begin with, so there's not much to save. But they are likely to get hit by cuts to Medicaid and SNAP, valuable and important benefits on which these families rely.
The Middle Class Sees a Mixed Bag
Whether or not you reap some of the new benefits of the bill depends on whether you: rely on tips (temporary deduction for qualified tip income, available regardless of itemizing status, beginning in tax year 2025-2028, capped at $25,000, with a phase out for individuals with income greater than $150,000 ($300,000 for married taxpayers filing jointly (MFJ); work overtime (deduction capped at $12,500 for individuals ($25,000 MFJ), phases out for individuals with income greater than $150,000 ($300,000 MFJ), and ends after 2028), or own a home in a high tax state (the state and local tax (SALT) deduction cap will increase from $10,000 to $40,000, for taxpayers earning less than $500,000, until 2029 before reverting to the $10,000 cap permanently.) According to the various models, those differences net out to a push, no big increase or decrease by 2030.
High-Income Earners: The Biggest Winners
The richest Americans would receive the biggest benefit, instead of losing 2.9 percent in income like the bottom earners, the top 5 percent would gain 2.9 percent. The bill also permanently increases the estate tax exemption to $15 million ($30 million MFJ), beginning in tax year 2026. This rule obviously benefits the wealthiest families, who will not pay any federal estate tax on amounts up to these levels.
The U.S. Fiscal Outlook: A Loser
Various independent analyses have found that this bill is going to cost at least $3.3 trillion over the next decade. Some politicians say that economic growth will offset these costs, but the numbers do not add up. According to Wharton, the bill “will lower GDP growth over the next 30 years, and GDP would be 4.6 percent lower in 2054 than under current law, at the same time, the Senate reconciliation bill increases debt by 17.5 percent over the next 30 years.”
Other (selected) Winners:
Auto Loan Borrowers: There will be a temporary deduction for qualified passenger vehicle loan interest beginning in 2025 through 2028, with a limit of the lower of: $10,000 per year, or 20 percent of the taxpayer’s AGI more than $100,000 ($200,000 MFJ), whichever is lower.
Seniors: Those 65 and older will receive a temporary (2025-2028) bonus deduction of $6,000 per individual and phases out at a rate of 6 percent of AGI over $150,000 for MFJ, or $75,000 for all other filers. This deduction is available to all qualifying taxpayers beginning in tax year 2025, and it expires after 2028.
Other (selected) Losers:
Student Borrowers: As if it was not hard enough, college students and their families are facing the end of subsidized and income-driven loan repayment plans, imposition of new overall limitations on student borrowing, and tightening of Pell Grant eligibility.
Future EV Buyers: The bill eliminates or substantially limits several tax credits designed to encourage investment and production of clean energy, alternative fuels, and electric vehicles.