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Reuters
17 hours ago
- Business
- Reuters
Trump tax bill poses limited benefits, higher costs for lower-income Americans
WASHINGTON, June 2 (Reuters) - U.S. President Donald Trump's signature tax break on tips promises relatively few upsides for low-income Americans, who face a net loss of income under his massive tax and spending bill in Congress, analysts say. The new tax break is one of several aimed at helping working-class Americans who are a key bloc in Trump's political coalition. But experts say it would reach only a fraction of the bartenders, hairdressers and other workers who rely on tips. And those who benefit could see gains outweighed by cuts to healthcare and food assistance. "If you're thinking about things that could help low-income workers, 'no taxes on tips' would not be high up on my list," said Martha Gimbel, director of the Budget Lab at Yale University. Several independent analyses conclude that the bill now before the Senate would effectively transfer money from poor Americans to the rich. The Penn Wharton Budget Model, for example, found it would reduce after-tax income by $1,500 for families earning less than $22,000 per year, and boost income by $104,000 for those earning more than $5.2 million. The nonpartisan Congressional Budget Office reached a similar conclusion. Still, the idea of making tipped income tax-free has drawn wide support since Trump first floated it last year at a campaign stop in Nevada, a swing state with a large hospitality industry. The bill that passed the House of Representatives last month allows workers earning up to $160,000 a year to deduct tips from their gross income until 2029, though tips would remain subject to Social Security and Medicare taxes. House Republicans say the bill would provide the typical family with a $1,300 tax cut and that business tax breaks would lead to higher wages for workers. "Permanently lower tax rates and a doubled standard deduction, combined with President Trump's no tax on tips, overtime, and auto loan interest, will help workers afford the roof over their head, food for their families, and help build their financial security and wealth,' House Ways and Means Committee Chairman Jason Smith, a Republican, said in a recent statement. Senate Republicans are likely to seek considerable changes to the bill, which also would make Trump's 2017 tax cuts permanent and implement other top priorities, like a crackdown on immigration. But the deduction for tip income would not help the 37% of tipped workers who already earn too little to pay any income tax, according to the Yale Budget Lab. Tipped employees account for only about 2.5% of all U.S. workers. The tax break would cost the U.S. government nearly $40 billion in lost revenue through 2028, according to the congressional Joint Tax Committee. Other benefits for working families face similar limits, including deductions on overtime pay and interest on auto loans. In each case, the greatest benefits accrue to people with higher incomes. "All of those will only benefit someone if they have enough income that they are paying a positive tax liability," said Brandon DeBot, policy director at New York University's Tax Law Center. The new tax breaks would be outweighed by higher costs from cuts to social safety-net programs and rising debt levels. At least 8.7 million lower-income Americans would lose health insurance coverage from new restrictions to Medicaid and the Affordable Care Act, according to CBO. Republicans have also added new restrictions to two bulwarks of support for low-income families: the child tax credit and the earned income tax credit. The legislation would temporarily increase the $2,000 child tax credit to $2,500 through 2028 and adjust it for inflation after that. But it contains a new requirement that parents provide Social Security numbers to qualify. That would exclude 4.5 million eligible children, according to the nonpartisan Center for Migration Studies. Families would also have to meet tighter standards to qualify for the earned income tax credit, a major anti-poverty program that reached 23 million tax filers in 2022. And analysts warn that cuts to Internal Revenue Service funding and staff would leave the tax agency less able to help lower-income people navigate the new restrictions. The legislation would add $3.8 trillion to the national debt, which now stands at $36.2 trillion, according to CBO. Ultimately, the cost would weigh most heavily on poor Americans, according to the Penn Wharton Budget Model, which estimated that low-income households in the future would see a lifetime loss of $8,500 due to a weaker safety net and higher debt service. The model found that some high-income households would see a lifetime gain of $17,800. "You're inheriting this higher debt, this higher burden. Somebody has to pay for it," said the budget model's director, Kent Smetters.
Yahoo
2 days ago
- Business
- Yahoo
The Seven Ugliest Provisions in Trump's ‘Big Beautiful Bill'
Donald Trump's 'Big Beautiful Bill' is a reverse-Robin Hood nightmare. It steals from the poor to give to the rich. The 1,038-page version that passed the House will also balloon the deficit by nearly $4 trillion. The Trump tax bill achieves this feat by extending (and in many cases expanding) tax breaks for the richest Americans, while at the same time depriving more than 10 million Americans of health insurance and regular access to their doctors, by axing $880 billion from Medicaid. It also increases red tape for Obamacare, while allowing other subsidies to lapse, boxing millions more out of their insurance. The bill is regressive as a matter of tax policy. It will reduce the take-home incomes of bottom 10 percent of income earners by four percent by the end of the decade, according to the nonpartisan Congressional Budget Office projects. Penn Wharton, Trump's alma mater, finds that most households earning less than $51,000 will immediately see their after-tax income decrease. Meanwhile, the bill boosts the incomes of the top one percent by nearly $70,000 in the first year alone, giving that elite cohort a collective $124 billion net tax cut. The Trump bill sorta makes good on Trump's campaign sales gimmicks — offering temporary, three-year tax breaks on tips (cost: $40 billion); the extra income earned from overtime ($124 billion); and auto loan interest ($58 billion); while also offering a tax credit to seniors, meant as an offset of taxes on Social Security income ($72 billion). But as passed by the House, the tax bill also has many ugly provisions. Some are related to taxes, like the abolition of taxes on gun silencers, or ending tax incentives for clean energy and cars. Others are just completely extraneous, like language prohibiting state- and local regulation of artificial intelligence for 10 is a survey of seven terrible tricks up the sleeves of the Big Beautiful Bill: 1) Undermining the Rule of Law A provision slipped into the House bill, unrelated to taxes, would have a major impact on the courts and the rule of law. It blocks any funding to enforce contempt of court orders. This, in turn, could enable the Trump administration to flout the rulings of judges without consequence. Erwin Chemerinsky, a professor of law as the University of California, is sounding the alarm that this is an affront to the basic functioning of our democracy. He writes in a post at Just Security that 'nothing could be done' to enforce injunctions against the executive branch were this provision to become law — 'even when the government had been found to violate the Constitution.' In fact, he adds, 'the greatest effect of adopting the provision would be to make countless existing judicial orders unenforceable.' These concerns are ripe because the Trump administration's countless illegal executive orders and actions keep getting turned back in court, and the administration's compliance — as with falling to 'facilitate' the return of Kilmar Armando Abrego Garcia from the gulag in El Salvador, as directed by the Supreme Court — has been irregular at best. 2) Rewarding Rich Homeowners Rich people in blue states have cause to laud the Big Beautiful Bill. It quadruples a tax break that one analysis finds 'Overwhelmingly Benefits Wealthy, White Households.' We are talking here about the state and local tax, or SALT, deduction. The tax break has some logic. It is intended to keep folks from having to pay federal taxes on the tax dollars they owe to governments closer to home. The 2017 Trump tax bill limited the deductibility of these payments — once unlimited — to $10,000, to help pay for its sweeping tax cuts for the rich and corporations. That partially preserved a break that's a boon to middle-class homeowners in blue states with high property taxes, including the Northeast or the West Coast, while stripping it from the vacation home and private-school set. High earners in states from New Jersey to California have since bridled against the SALT deduction limit, arguing it's a form of double taxation, and have won over political allies in both parties. Inside the House GOP, a group of lawmakers calling themselves the 'very salty' five held up the Trump bill until the SALT deduction was boosted to $40,000 and made available to couples earning up to half-a-million dollars a year. 3) A Boondoggle for Private Schools On the charitable giving side of the tax act, the House Bill creates a back-door subsidy for private school vouchers. Rich people who donate to nonprofits that hand out vouchers to private K-12 schools will now receive not a tax deduction — usually capped at 35 cents off taxes for every one dollar donated — but a tax credit. Every dollar donated is counted as a dollar paid in taxes. This tax credit not only applies to the value of cash donations, but the market value of stocks. In many cases — as outlined here — donors would be able to reap a greater return on their investments by donating stock that has appreciated in value, and reaping the tax benefits, than by selling the investment and then owing capital gains taxes. The value of this incentive is estimated at $23 billion over 10 years, with the administration subsidizing the flight from public education at the same time it aims to eliminate the federal Department of Education. 4) Leave No Heir Behind No GOP tax bill would be complete without a giveaway to the scions of billionaire families. The Republican Party has long demonized the estate tax as the 'death tax,' inveighing against it as a threat to salt-of-the-earth family farmers. Thanks to Trump's first tax bill, the estate tax exemption currently stands at nearly $27 million for couples, but is due to fall to about half that, absent a change in the law. The 'Big Beautiful Bill' indexes the current exemption to inflation and makes the tax break permanent. A rich couple will be able to pass on $30 million to their descendants without paying a penny of tax next year. According to a letter from Americans for Tax Fairness, 'this handout to lucky heirs and heiresses will cost over $200 billion in lost revenue over 10 years.' 5) Shortchange Kids of Immigrants A MAGA tax bill needs some anti-immigrant juice. And the Big Beautiful Bill provides that by limiting availability of the child tax credit to only citizen children with a citizen parent. The child tax credit is currently available to children with Social Security numbers, so long as their parents have a taxpayer identification number, given to immigrants who pay taxes. The BBB would increase the value of the credit to $2,500, but require that the parent or parents claiming the credit also have Social Security numbers, as a proxy for citizenship status. The change is expected to disqualify nearly two million citizen children in mixed-status households from this vital government support. 6) No Insurance for You! One of the most controversial changes in the Big Beautiful Bill is to impose a work requirement on supposedly 'able-bodied' adults to maintain eligibility for Medicaid, the government health insurance program for low-income and disabled Americans. The requirement is spelled out as 80 hours a month of work or volunteering. The implementation is left up to states, some of which are committed to expanding health coverage, but others which have long been ideologically opposed. Enrollees must often navigate a maze of forms and bureaucratic hurdles to establish and maintain eligibility — even before this new work requirement — because Medicaid contains strict income caps. Recipients must prove they are, in fact, poor. The Big Beautiful Bill however adds insult to injury. People who are kicked off Medicaid by failing to navigate the requirements around work and work-reporting, will be punished by becoming ineligible for subsidies for individual insurance plans sold under Obamacare. By design, the Trumpy Medicaid changes will eliminate coverage for 10.3 million people, according to the CBO. 7) Work for Your Supper Work requirements are fetishized throughout the Big Beautiful Bill, and also apply to recipients of SNAP, the acronym for the federal food assistance program. As passed, the House bill would expand work requirements in SNAP on adults up to the age of 65. (Current work requirements phase out at 55). It would also require parents with children as young as eight to work outside the house, turning another generation of young poor children into latchkey kids. According to modeling by the Urban league, the Big Beautiful Bill — which so richly rewards billionaires and their heirs — would be financed in part by taking food out of the mouths of hungry families. As many as 2.7 million households would lose food benefits, with the average blow to the family grocery budget totaling $254 a month. More from Rolling Stone Trump Says He's Fired Director of National Portrait Gallery ... 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Newsweek
3 days ago
- Business
- Newsweek
Trump Tariff Revenue Soars in May
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. President Donald Trump's aggressive tariff policy has triggered widespread economic disruption, from rising prices for American consumers to retaliatory measures from key trading partners. Yet despite the global fallout, the administration's tariff push is delivering a surprising result at home. As of May 30, the U.S. is on pace to set a new monthly record in tariff revenue—nearly $23 billion, about three times the amount collected in May 2024. That record-breaking pace contributes to a total of $68.23 billion collected so far in 2025, a 78 percent jump from the same point last year, according to Treasury Department data analyzed by the Penn Wharton Budget Model. Why It Matters Trump has defended his tariff policy as a means to restore American manufacturing as well as a way to fund the government without relying on income taxes. His administration argues that tariffs will make it possible to eventually abolish the federal income tax altogether. The White House continues to radiate optimism that negotiated deals with other countries will occur despite Trump's claims that he will set his own deals and a lack of clarity about how the process goes forward. U.S. President Donald Trump speaks during the Memorial Day wreath-laying ceremony at the Memorial Amphitheater in Arlington National Cemetery on May 26, 2025 in Arlington, Virginia. Memorial Day is observed on the last Monday in... U.S. President Donald Trump speaks during the Memorial Day wreath-laying ceremony at the Memorial Amphitheater in Arlington National Cemetery on May 26, 2025 in Arlington, Virginia. Memorial Day is observed on the last Monday in May each year to honor and mourn U.S. military personnel who died while serving in the United States Armed Forces. More Photo byWhat To Know The revenue increase is driven by steep duties imposed on imports, particularly from China, where tariff rates have climbed as high as 145 percent. The Penn Wharton analysis shows a significant monthly spike in revenue of $6.8 billion at the end of April, highlighting the impact of new levies or preemptive stockpiling by businesses ahead of expected rate hikes. While such figures bolster the administration's argument that tariffs can serve as a major funding source, the underlying mechanism of who pays is less direct. Tariffs are a tax on imports, meaning they are initially paid by U.S. companies at the border, but economic research shows these costs are ultimately passed on to American consumers through higher prices. The Budget Lab at Yale University projects that the full suite of tariffs enacted in 2025—if kept in place—would raise $2.7 trillion over the next decade. However, the same analysis estimates a corresponding $394 billion reduction in other tax revenue due to negative effects on economic output. It calls the current average effective tariff rate of 17.8 percent the highest since 1934. The Budget Lab warns that tariffs work like a regressive tax, hurting low-income families the most. It estimates that households in the second income decile would lose about $1,300 a year from higher prices, while those in the top decile would lose around $6,100. Overall, consumer costs would rise by 1.7 percent in the short term—roughly a $2,800 hit per household. Clothing and textiles are especially impacted: prices for shoes have climbed 15 percent, and apparel is up 14 percent in the short term. The long-run impact keeps prices 19 percent and 16 percent higher, respectively. The Tax Foundation, an international research think tank based in Washington D.C., echoes those concerns, warning that the projected $2.1 trillion in tariff revenue through 2034 will come at a significant cost: a 0.8 percent long-run reduction in U.S. economic output and 685,000 fewer full-time jobs. Their analysis underscores the fragility of relying on tariffs to offset other costs—particularly Trump's "One Big Beautiful Bill," which extends and expands tax cuts from the 2017 Tax Cuts and Jobs Act at an estimated $4.5 trillion cost over the same period, or more than double the Tax Foundation's optimistic estimate for tariff revenues. What People Are Saying Joseph Foudy, professor at NYU's Stern School of Business, told Newsweek: "We're essentially picking fights with every major country in the world. Even if we end up cutting deals, the level of acrimony and the signal that the U.S. is no longer a reliable long-term partner weakens our position." Todd Belt of George Washington University's Graduate School of Political Management told Newsweek: "The industrial landscape in the U.S. has completely changed. Most heavy industry has left the country, along with many well-paying, middle-class, union jobs. That's created a lot of resentment. Trump is promising to bring those jobs back—though I don't think that's realistic—and tariffs are his way of doing it". Scott Bessent, Treasury Secretary, in an interview with Fox News: "We were on track for a financial crash. Government spending was out of control. It felt like 1998 or 2007. We've pulled off that path and set up long-term growth instead." What Happens Next The revenue numbers come as the legal foundation of Trump's tariff strategy isremains wobbly. A federal court ruled that the president's use of the International Emergency Economic Powers Act to impose some tariffs was unlawful. However, an appeals court has allowed the reciprocal tariffs to remain in place while the case winds through the appeal process. It could end up at the Supreme Court.
Yahoo
16-05-2025
- Business
- Yahoo
GOP tax bill would shrink incomes for low earners: Analysis
Many different think tanks and legislative analysts in Washington have been sounding the alarm that the GOP bill to cut taxes and spending has greater advantages for wealthier taxpayers than it does for working Americans. But one group is projecting 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 Budget Model 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 2026 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 Tuesday. Economist Dean Baker of the Center for Economic and 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 and Children's Health Insurance Program 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 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: Josh Brecheen (Okla.), Chip Roy (Texas), Ralph Norman (S.C.), Andrew Clyde (Ga.) and Lloyd Smucker (Pa.). Smucker said he hoped to resolve the disagreement quickly and have another vote Monday. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
16-05-2025
- Business
- The Hill
GOP tax bill would shrink incomes for low earners: Analysis
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.
