New analysis shows that higher earners will benefit most from the Senate tax bill in the short term, but future generations in all income bands could be “bad.”
Senate votes to advance tax and spending bills
President Trump’s bill passed a key procedural vote in the Senate. Lawmakers voted 51-49.
President Donald Trump’s tax bill could “deteriorate” future generations, regardless of income, according to a new report in Penn Wharton’s budget model.
Like other analyses, the latest findings from the nonpartisan research initiative suggest that most Americans see tax cuts. In the long run, however, a July 1 report from Penn Wharton Budget Lab predicts lifetime losses for all revenue brackets.
Kent Smetters, a professor at Penn Wharton’s budget model, said:
The analysis found that the version of the Senate tax bill, which was passed slightly on July 1, leads to a higher deficit and delayed economic growth compared to its counterparts from the House.
The bill heads to the House for final approval. Trump requested the final version on his desk, and is ready to sign by July 4th, but admitted that the deadline could be “very difficult” as some House Republicans expressed dissatisfaction with the changes in the Senate.
What’s the difference under the Senate version of the tax bill?
The law, dubbed “One Big Beautiful Bill,” will provide tax cuts from Trump’s first term in 2017, increase child tax credits and introduce other tax cuts, including hints and no tax on overtime wages.
To help pay for the cuts, the government will cut spending on the Supplementary Nutrition Assistance Program, previously known as Food Stamps, and cut Medicaid, a program that provides health insurance to more than 71 million low-income Americans.
The Senate version has some important differences from the House bill, including:
- A permanent tax credit for companies that allows companies to immediately deduct all costs of qualification investments and research projects, not for years. Under the House bill, these tax cuts were effective from 2025 to 2029.
- There was a temporary adjustment that permanently strengthened the standard deduction, adding $750 for single filers, $1,125 starting in 2025, $1,500 for married couples, $1,500 for one filer, $1,000 for heads of households, and $2,000 for couples between 2025 and 2028.
- The child tax credit has been permanently increased to $2,200 compared to a temporary increase between 2026 and 2026-2028.
“The Senate makes things more permanent,” Smetters told USA Today. “On the other hand, we don’t have to revisit the same politics in four years. On the other hand, there is the financial costs associated with it. That means more debt and more burdens depending on future generations.”
Medicaid will also be reduced in the Senate version, according to the nonpartisan Congressional Budget Office. By 2034 there is an estimated 11.8 million people who are not insured, compared to the 10.9 million estimate based on the House proposal.
Impact on future generations
Various analyses suggest that Trump’s tax bill rewards Americans with higher incomes than counterparts with lower incomes.
For example, a June analysis of the House bill by the Congressional Budget Office found that under the law, resources for the poorest people would be reduced by about $1,600 a year, primarily due to Medicaid and food aid reductions. On the other hand, the wealthiest people earn an average of around $12,000.
Another June report from Yale Budget Lab suggests that the fifth of the earners loses about $560 a year, while the top 20% wins $6,000.
However, according to Penn Wharton’s budget model, all future generations will experience lifetime losses, regardless of income. High-income households are expected to lose $5,700 under the Senate bill, while low-income households lose $22,000. The report points to a decline in social security network and a decline in wages as key drivers.
Under the House bill, Penn Wharton’s budget model projected lifetime losses from $500 for high-income households to $15,800 for low-income households.
“They’re going to get worse, in future generations. It doesn’t matter where they fall,” Smutters said. “In the end, someone has to pay (the tax bill) and essentially pass that on to the next generation.”
Slow economic growth
According to previous analysis of the budget model, the House version showed a 0.4% increase in GDP by the tenth year, while the Senate version brings a 0.3% loss. Thirty years later, GDP fell 4.6% in the Senate bill and 1.5% in the 1.5% House version.
Higher deficits
According to Penn Wharton’s budget model, the main deficit is projected to increase $3.1 trillion over the next decade under the Senate tax bill.
Other reports also found higher debt loads under the Senate bill. The Congressional Budget Office plans to add $3.3 trillion to citizen debt over the next decade, predicting it will be $800 billion more than the House bill. A July report from Yale Budget Lab says the Senate bill would add $3 trillion to its debt by 2034, compared to the estimated $2.4 trillion in the House bill.
How much do low-income Americans lose?
According to the latest Penn Wharton budget model analysis, the lowest-earning households will lose their after-tax income in both the short and long-term, while higher workers will benefit under the Senate bill.
- Income under $18,000 will lose an average of $235 in 2027 and $1,380 by 2033.
- Those who make between $18,000 and $52,999 will lose $75 in 2027 and $1,625 by 2033.
- Those who earn between $53,000 and $95,999 will win $1,350 in 2027, but will lose $130 by 2033.
- Those who earn between $96,000 and $178,999 will earn $3,880 in 2027 and $2,825 by 2033.
- Those who earn between $179,000 and $271,999 will earn $6,615 in 2027 and $4,985 by 2033.
- Those who make between $272,000 and $400,999 will earn $9,360 in 2027 and $7,670 by 2033.
- Those who earn between $401,000 and $1,019,999 will earn $20,605 in 2027 and $18,645 by 2033.
- Those who earn between $1,020,000 and $4,450,999 will earn $36,020 in 2027 and $29,430 by 2033.
- Those who earn more than $4,451,000 will earn $290,485 in 2027 and $82,255 by 2033.
Smetters said the numbers could be slightly adjusted as more information becomes available for specific corrections.
