Opinion: How the Trump tax cut law will hurt the working class
Those changes will leave millions of Americans worse off. When accounting for the tax changes and benefit cuts combined, people in the lowest income quintile, with incomes below $13,500, will lose an average of $600 per year, according to the Yale Budget Lab. The next quintile will lose $65 per year. The healthcare and food aid cuts will have little impact on top earners, for obvious reasons. The top quintile will gain $6,500 in after-tax savings from all of the law's provisions, while the top 1% will net more than $30,000.
This is what economists call a “regressive” policy change because the economic burden falls more heavily on those with lower incomes. “The bill has four overriding characteristics,” Howard Gleckman of the Tax Policy Center wrote recently. “It is regressive, expensive, complicated, and it treats people who make roughly the same amount of money in very different ways.”
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Tax cut defenders often point out that the wealthy typically get the biggest tax cuts because they pay the most taxes in the first place. That’s generally true. But the wealthy are a distinct minority, which means a regressive law such as the OBBBA dis-serves millions of voters, and possibly a majority of them. The bottom two income quintiles, for instance, include roughly 92 million taxpaying units, whether singles, married couples, or other designations. There are only 26 million taxpaying units in the top quintile.
Maybe that’s what Murkowski found so agonizing. “Do I like this bill? No,” she told a reporter on July 2. “I know in many parts of the country there are Americans that are not going to be advantaged by this bill.”
Trump can point to working-class provisions such as the elimination of taxes on tip income and overtime pay, with limitations based on the type of work and the amount of income. Some workers will in fact benefit from those carve-outs. But tax analysts argue that favoring certain types of work in that manner violates the principle of “horizontal equity,” the idea that similar incomes should be taxed in similar ways.
To use the example of a restaurant, a waiter earning tip income would get a tax break that a cook paid hourly would not. That distorts the tax code, creates incentives to cheat, and generates legitimate grievances among the unlucky workers not gifted a tax break.
The OBBBA is already unpopular, with 64% of Americans disapproving and just 35% approving, in one poll. The real vote will come in the 2026 midterm elections, when Americans will express whether they feel better off or worse off under unified Republican control of government.
Getting Americans to like this law might be a more agonizing ideal than passing it.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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