House Republicans are beginning the first procedural steps that will allow them to pass major tax legislation before the end of this year. The emerging details reveal a deeply flawed package that prioritizes tax cuts for the highest-income Americans over low-income and middle-class families. Under the proposed plans to finance the package, not only would most Americans receive smaller tax cuts than those going to the wealthiest Americans, but they also would end up paying higher costs—including for housing, health care, or education.
Americans already understand that these proposals are out of step with their own priorities. Recent polling shows that a vast majority of voters think that “[l]etting the wealthy and corporations pay less in taxes hurts middle class and working people who have to pay more in taxes as a result.” Other polling shows that voters think Congress should cut the federal budget deficit, even if that means not extending and expanding the 2017 Trump tax cuts; only 1 in 4 think Congress should pass another sweeping tax bill. Despite repeated polling showing that cutting taxes for the wealthy and corporations is deeply unpopular, Republicans in Congress have put this at the top of their to-do list.
1. Most tax benefits would go to high-income households
The 2017 tax law cost $1.9 trillion, showering enormous giveaways on the wealthy and the biggest corporations: More than half of the tax cuts went to the top 10 percent of Americans.
Republicans in Congress are planning to repeat this approach by extending the expiring provisions. This means that once again, any benefit for low-income and middle-class families would pale—both in raw dollar amounts and as a percentage of after-tax income—in comparison to the benefits received by the wealthiest households.
For example, a recent analysis by the U.S. Treasury Department found that the average tax cut for the top 1 percent of households was $60,300 (a 3.9 percent increase in after-tax income), compared with an average tax cut of $660 for the middle 20 percent of households (a 1.1 percent increase in after-tax income). In fact, the tax cut for the top 1 percent was larger than the entire annual after-tax income of a typical household in the middle 20 percent.
This distributional math combined with President Donald Trump’s tendency to surround himself with self-interested billionaires means that Trump’s inner circle stands to reap substantial personal financial benefit from both the original and the new tax cuts. This includes his nominees for Cabinet, which is stacked with ultrawealthy donors as well as the heads of several major technology platforms.
2. House Republicans plan to slash investments in health care, nutrition assistance, education, and manufacturing to pay for tax giveaways for the wealthy
Tax cuts for the rich are not free—they’re paid for by the rest of America. House Republicans recently shared their plans for how they would pay for these tax cuts, and the breadth of who would pick up the tab is staggering. The following examples demonstrate how the “menu of options” to pay for the tax giveaways would gut the public services upon which Americans rely:
- Cutting health care to help fund tax cuts for the top 2 percent. The House Republican document outlines 14 different sources of savings from Medicaid. Medicaid “provid[es] health care coverage to nearly 1 in 5 Americans, including low-income individuals and families, children, pregnant women, elderly adults, and people with disabilities.” House Republicans will reportedly instruct the House Energy and Commerce Committee to find up to $2 trillion in 10-year savings from cuts to Medicaid. For reference, that amount is less than the price tag of extending the expiring individual and estate tax provisions for the top 2 percent of households ($2.4 trillion).
The largest set of cuts in the proposal—up to $900 billion—comes from limiting the federal government’s matching funds to states to a fixed amount per enrollee; these are known as per capita caps. These caps would grow more slowly than actual health care costs, generating escalating federal savings, and deepening health care cuts, over time. As a result, states would be forced to make up the difference by cutting health insurance enrollment, reducing already paltry reimbursements to providers, cutting other services, or raising their own taxes.
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- Cutting nutrition assistance while providing a $6 million tax cut for the heirs of the largest estates. The House Republican document outlines nine different sources of savings from the Supplemental Nutrition Assistance Program (SNAP), which is the nation’s largest anti-hunger program and serves 1 in 8 Americans. The largest cut would come from reversing the 2021 increase in the U.S. Department of Agriculture’s Thrifty Food Plan (TFP), which serves as the basis for the calculation of SNAP benefits. The department made this change to more accurately reflect the cost of a healthy diet after Congress, in the bipartisan 2018 Farm Bill, directed it to make an update. The change increased average SNAP benefits to a still-modest $6.20 per day.
House Republicans would legislate this enormous increase in hunger as part of a package that increases the amount that the wealthiest families can pass on to their heirs tax free—from about $14 million to $28 million per couple. This would represent an approximately $6 million tax cut per estate for the heirs of the largest estates. In fact, the $274 billion in savings House Republicans have cited from cutting SNAP benefits by reversing the 2021 TFP increase is about the same size as the $223 billion estate tax cut.
- Raising energy costs by eliminating clean energy and manufacturing tax incentives. These investments are critical to ensuring the continued competitiveness of American high-tech industries in the 21st century. Rolling back energy and manufacturing tax incentives would leave American firms ill equipped to compete in the global market and would likely contribute to their decline domestically and abroad, with one report estimating that repeal would cut more than $50 billion in annual exports. The incentives ensure the long-term economic strength of America’s manufacturing industry in the face of rapidly intensifying global competition, especially from China. Cutting these investments would also raise families’ costs: Cuts to clean energy tax credit investments, for example, would spike monthly energy bills by an average of 10 percent.
- Making college less affordable, including by taxing tuition scholarships. Since 1954, scholarships that help students afford college tuition have generally been excluded from taxable income. House Republicans have proposed taxing tuition scholarships for the first time in 70 years to help pay for tax cuts. Their list of possible pay-fors also includes a host of other policies that would make attending college more expensive, such as eliminating the American opportunity tax credit, letting interest on student loans accrue while borrowers are in school, capping the size of Pell Grants, and eliminating the tax deduction for student loan interest.
Combined, these measures would make attending college more expensive for low-income and middle-class students, putting it further out of reach. Nowhere does the House Republican document suggest raising high-income families’ costs of paying for college—such as by curtailing the tax benefits of 529 plans, which provide far larger benefits to high-income families than to middle-income families.
3. Other financing mechanisms in the House Republican tax package would raise families’ housing and grocery bills
The emerging House Republican tax package would potentially drive up families’ costs in ways beyond the program cuts discussed above.
For example, President Trump has proposed using executive authority to enact enormous 10 percent to 20 percent across-the-board taxes on imported goods. House Republicans are likely to claim the revenue from those taxes as a way to offset his latest round of tax giveaways for the wealthy. Taxes on imported goods, or tariffs, are a tool that presidents of both parties have successfully used as part of effective trade strategies. If used strategically, tariffs can support American businesses and workers by providing a means to fight back against other countries’ unfair trade practices and to promote well-paying, union jobs.
Yet Trump is proposing tariffs for a far different use: raising revenue to pay for tax giveaways to the wealthy and large corporations. This includes goods that the United States does not produce at a large scale and for which it cannot meet domestic demand, such as coffee and bananas. This approach is not rooted in sensible trade policy or even in a desire to continue the major revitalization of American industry initiated by former President Joe Biden but instead in finding a way to offset the cost of regressive tax cuts. Unlike the individual tax code, which features progressive tax rates calibrated by income, import taxes—paid by U.S. companies, which will likely pass the costs onto average American consumers—work like flat sales taxes and are among the most regressive U.S. taxes. Using tariffs in this blunt way is an approach to revenue that the federal government abandoned more than 100 years ago precisely because it was so unfair to the average American and their family.
Trump and congressional Republicans are also likely to finance the tax cuts by putting trillions of dollars on the nation’s credit card. The chairman of the House Ways and Means Committee, Rep. Jason Smith (R-MO), and the chairman of the Senate Finance Committee, Sen. Mike Crapo (R-ID), have said, in fact, that extending expiring tax cuts does not require offsets.
Higher deficits and debt can increase interest rates, which makes it less affordable to buy a home or a car, carry student loan debt, or start a business. The effects of higher government debt on interest rates are uncertain and modest, but the sheer scale of higher debt projections resulting from permanently extending the tax cuts means that the impact could be sizable.
In particular, a deficit-financed tax package is likely to worsen the nation’s housing shortage because housing investment is especially sensitive to interest rates. The Congressional Budget Office projected in 2018 law would reduce housing investment, since its provisions were not favorable to housing and “[r]esidential investment is reduced throughout the entire period by crowding out.” Inflation-adjusted housing investment fell immediately after the law was enacted. Today, it is actually lower than it was before the law passed and far lower than it would be if it had stuck to its pre-2018 trend. This reduction in housing investment and supply drives up rents.
Policymakers should not ask middle-class Americans trying to buy their first home or rent an apartment to shoulder the burden of financing tax cuts for billionaires.
4. The first tax law failed to fulfill its promises
The 2017 tax law’s corporate tax cut was supposed to raise wages, create jobs, and simplify the tax code. But it did not, in fact, trickle down; instead, it fueled a record $1 trillion explosion in stock buybacks in 2018. Buybacks enrich shareholders, not the workers who power corporations. To the extent that any workers received a wage increase from the 2017 tax cuts, increases went to highly compensated employees, with the bottom 90 percent of corporations’ employees receiving no wage gains. Unlike the expiring individual tax provisions of the tax law, the reduction in the corporate tax rate was permanent, but that has not stopped President Trump from proposing to slash it another 6 percentage points—down from the current 21 percent to 15 percent.
The 2017 tax law was also supposed to make it easier for people to file their taxes, a promise made famous by former House Speaker Paul Ryan (R-WI) repeatedly suggesting filing could be done on a postcard. Instead, it was the 2022 Inflation Reduction Act that led the IRS to launch Direct File in 2024 in 12 states; first-year users reviewed this free tax-filing service positively, and the IRS made it permanent across the United States. Republican lawmakers have proposed abolishing Direct File, which would force people to turn to for-profit options such as TurboTax. Treasury Secretary Scott Bessent said Direct File would remain open this filing season but refused to say whether he would eliminate it in forthcoming filing seasons.
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Conclusion
Families need legislation that puts their own needs—such as lower costs for education, homes, and food—above benefits for billionaires. The emerging House Republican tax package is poised to do the opposite.