GOP tax bill would shrink incomes for low earners: Analysis

The Hill

16-05-2025

Many different think tanks and legislative analysts in Washington have been sounding an alarm that the GOP tax-and-spending cut bill has greater advantages for wealthier taxpayers than it does for working Americans.
But one group is projecting that lower earners will not only receive smaller benefits from the bill but will actually be financially worse off when the individual rate cuts and benefit reductions are taken together.
The analysis from Penn Wharton found that people in the second income quintile, making between $17,000 and $51,000 per year, will see a net reduction in their incomes of $705 as a result of the GOP tax package.
The effects for that income group get worse over time. The average 1.5 percent income reduction in 2016 expands to a 2 percent reduction by 2033 for a net income reduction of $1,200.
That's compared to an $845 gain in 2026 for people making midrange incomes of between $51,000 and $93,000 per year. For people in the top quintile of the income spectrum, the total gains in 2026 are more than $468,000.
While more comprehensive than the distributional breakdown of the GOP tax package from the Joint Committee on Taxation (JCT), the Penn Wharton analysis is in keeping with the JCT's official score, which is limited to the tax effects of the package and excludes the monetary benefits of federal social programs.
People in the second income quintile in the JCT analysis will see a $24 billion reduction in their taxes while middle-quintile earners will get a $50 billion reduction, fourth quintile earners will get a $106 billion reduction, and the top fifth of earners will get a $385 billion reduction.
Since people at the lower end of the income spectrum make greater use of social programs like food stamps and federal health care, which are on the GOP chopping block, than those at the upper end, the result is a net decrease in income for lower earners as opposed to simply a smaller share of benefits, the Penn Wharton analysis appears to show.
Other analytical groups in Washington have been making similar points about the benefits of the package being skewed to the rich.
'House Republicans' budget and tax proposals would lead to nearly 14 million people losing health care coverage by 2034 and would raise costs for millions of working families,' the Center for American Progress wrote on Tuesday.
Economist Dean Baker of the Center for Economic Policy Research noted to The Hill the legislation's continuation of the so-called carried interest loophole, which benefits hedge fund and private equity managers.
'They left the carried interest deduction in place, an absolutely unjustifiable tax break to some of the richest people in the country, that even Trump wanted changed,' he said.
Millions are set to lose public health insurance as a result of the GOP bill, with 7.1 million people projected to lose Medicaid/CHIP access in 2028 alone. Millions more are expected to lose coverage as a result of codified changes to the Affordable Care Act (ACA) and the failure to extend ACA subsidies.
Americans will also lose access to food stamps as a result of the legislation, which seeks to put work requirements on some people who are enrolled in the program. Previous estimates for the effect of work requirement proposals — which critics often describe as paperwork requirements more than actual work requirements — showed reductions of between 3 million and 3.5 million people from food stamps, according to the Congressional Budget Office.
The Republican bill is far from a done deal. Deficit hawks on the Budget Committee voted down their portion of the bill on Friday, demanding steeper cuts and incurring the ire of President Trump.
'We don't need 'GRANDSTANDERS' in the Republican Party. STOP TALKING, AND GET IT DONE!' Trump wrote online.
Five Republicans voted no on the measure. They were Josh Brecheen (R-Okla.), Chip Roy (R-Texas), Ralph Norman (R-S.C.), Andrew Clyde (R-Ga.) and Lloyd Smucker (R-Pa.). Smucker said he hoped to resolve the disagreement quickly and have another vote Monday.