Trump's tax law cuts poorest incomes, boosts wealthiest households: CBO

Business Standard

a day ago

Earners in the middle of the distribution will see their annual resources grow by about $800 to $1,200 on average, according to the analysis
Bloomberg
President Donald Trump's tax and spending law will deal a financial blow to the poorest Americans while boosting the income of wealthier households, according to a new analysis from the Congressional Budget Office.
The poorest 10 per cent of households will lose an average of about $1,200 in resources per year, amounting to a 3.1 per cent cut in their income, according to the analysis released Monday of the 'One Big Beautiful Bill Act.' Households in the highest 10 per cent of incomes will see about a $13,600 boost in resources on average, amounting to a 2.7 per cent increase in their incomes.
Earners in the middle of the distribution will see their annual resources grow by about $800 to $1,200 on average, according to the analysis.
The hit to poorer families will largely result from the loss of benefits from social spending programs, while much of the benefit to the wealthy will come from tax benefits and cash transfers, according to the CBO.
Trump and his allies have in recent weeks blasted independent agencies for releasing numbers with which the administration disagrees. The nonpartisan CBO, led by Phillip Swagel — who served in Republican President George W. Bush's administration — has repeatedly come under fire over its growth forecasts.
The tax and spending bill, enacted last month, includes much of Trump's economic agenda. It extends his 2017 income tax cuts while implementing a number of new and expanded breaks, including a higher cap on federal deductions for state and local taxes, an enhanced child tax credit and no taxes on tips and overtime pay. To offset some of the cost, the law includes a number of cuts for clean energy initiatives and social spending programs, including Medicaid and food stamps.
Deficit Impact
The CBO last month said the bill would add $3.4 trillion to US deficits over the next 10 years, not accounting for dynamic effects such as the potential growth impact.
Democrats and other critics have denounced the legislation as benefiting wealthier individuals at the cost of low-income families. The scaling back of the social safety net comes alongside an economic slowdown and weakening in the job market that would enhance the importance of those benefits.
Economists have warned price increases due to tariffs would disproportionately impact lower-income Americans who spend a larger share of their income on necessities, such as food.
Recent polls show a majority of voters disapprove of the tax law, with 55 per cent of voters against it in a Quinnipiac University poll and 61 per cent of voters in opposition in a CNN/SSRS poll.
The loss of resources for lower-income families will likely be delayed because Republicans wrote the law so that many of the cuts to social spending programs don't take effect until after the 2026 midterm elections, while the tax cuts will be noticeable early next year.
The law imposes new work requirements for able-bodied Medicaid recipients, limits states' ability to tax healthcare providers to help fund the program and creates new cost-sharing rules for beneficiaries who are covered under the Affordable Care Act expansion. CBO estimates that 10 million people will be left without health insurance by 2034 due to the law's changes to Medicaid.
The legislation also creates new work requirements for the Supplemental Nutrition Assistance Program, or food stamps, with exceptions for Alaska and Hawaii. The CBO estimates that those requirements will reduce participation in the program by about 2.4 million people in an average month over the next decade. An additional 300,000 people in an average month will lose benefits due to a separate provision, the analysis found.