Congressional Republicans are about to pass a new tax and spending bill that could become a “big and beautiful bill,” but mostly for wealthy Americans.
Republicans, who are majority in both the House and Senate, are working to pass one big beautiful bill law established in 2017 that is set to deliver a permanent, massive tax cut.
Republicans say the new bill will “reduce spending on families and job creators and cut taxes forever,” and ultimately “the government works more efficiently and effectively for all Americans,” House Speaker Mike Johnson said after the bill was passed.
However, the biggest deduction is ultimately sent to the wealthiest Americans. The wealthiest Americans will stand to save hundreds of thousands of dollars in taxes a year if the 2017 tax cut is permanent.
For most Americans, the 2017 Tax Cuts and Employment Act (TCJA) reduced taxes slightly after standard deductions and rates for most tax ranges were reduced. The bill also raised the child tax credit from $1,000 to $2,000 per child.
The bill was a huge boon for wealthy Americans who saw massive savings after the tax cuts. The bill established a 20% deduction of revenue through certain business entities known as pass-through entities, including LLCs and partnerships. It also doubled the real estate and gift tax exemptions of between $5.5 million and $11.2 million per person. This is primarily aid to wealthy families.
This bill cuts taxes even among the wealthiest Americans in the highest portion of the top income bracket, meaning that Americans in the top 0.1% percentile of earners are saving much more than low-middle or middle-class Americans.
The controversial cuts in the corporate tax rate, which have fallen from 35% to 21% since the tax cut was passed, will also be permanent with the new bill.
Corporate tax rate reductions are spending billions of dollars in revenue losses from the federal government. From 2018 to 2021, top US companies saved a combined $240 billion in taxes following the cut, according to an analysis by the Institute for Tax and Economic Policy Research.
Trump defended corporate tax cuts in 2017, saying it was “great for middle-income people and jobs,” meaning businesses will use their tax savings to invest in more workers and higher wages.
However, some economists say the tax cuts have done little to help the middle class. Two years after the cuts were passed, wage growth slowed in 2019, with slightly growing due to workers inflation and high demand shortly after the pandemic.
Meanwhile, companies have spent much of their savings buying back on shares when they bought their own shares, a move that would benefit shareholders more than ever before.
Last year, Goldman Sachs estimated that the first share buybacks this year would reach $10 as stock buybacks grew. An analysis from the Groundwork collaboration of the Progressive Think Tank found that 11 top consumer goods companies, including Procter & Gamble, Pepsico and General Mills, have spent $463 billion in stock buybacks since 2017.
As for the economy as a whole, economists say much of the government’s revenue growth could be attributed to inflation and recovery from the pandemic recession seen in the US stock market, rather than the 2017 tax cuts.
“In general, the economy has not shown any dramatic changes as a result of the tax cuts passed in 2017,” said Joseph Rosenberg, a senior fellow at the Centre for Tax Policy. “Most of the quality evidence we have suggests that the impact on the economy was relatively modest.”
Estimates say the tax cuts will cost the federal government 4.6 tons of loss in revenue over the next decade.
To offset the costs of tax cuts, Republicans are cutting back on major government assistance programs and cuts and cuts that Republicans say will save 1TN to the federal government. The more stringent work requirements of the Medicaid and Supplementary Nutrition Assistance Program (SNAP) programmes result in fewer people accessing government health insurance and food assistance.
The bill is set to end the Clean Energy Tax Credit passed under the Biden administration, which encourages businesses to use carbon-free energy sources and strengthen production of clean energy technologies.
Trump also said his tariffs would bring “trillions of trillions of dollars to cut our taxes and pay back our government bonds.” Estimates show that all Trump’s announced tariffs will only bring an estimated 3.1 tonnes over the next decade, including suspended retaliatory tariffs. Universal tariffs of 10% generate $217 million in revenue.
However, tariffs are also a form of tax on the majority of American companies importing goods from overseas. Over the past few months, businesses including Walmart and toymer Mattel have said they will ultimately have to hand over some of the tariff costs to consumers.
An analysis from Yale Budget Lab estimates that when prices rise, the average American consumer spends $2,800 on tariffs. Those at the bottom of the income distribution could lose $1,300.
Democrats, along with Senate minority leader Chuck Schumer, have universally criticised the bill and denounced it as a “cruel and dangerous plan,” which is particularly harmful to working-class families affected by Trump’s tariffs.
“It’s really obvious that this bill is financially irresponsible and regressive,” said Daniel Hornn, former deputy director of Biden’s National Economic Council and a senior fellow at MIT. “People who earn less than $50,000 a year will actually see their income drop, primarily funding tax cuts for high-income people.”
