House Republicans passed a legislative package known as the “One Big Beautiful Bill Act” on Thursday, which has sparked a debate over the stark contrast between high-earners and low-income households. The bill, which includes tax-cutting measures for business owners, investors, and homeowners in high-tax areas, is projected to benefit the wealthiest Americans while potentially harming low-income families.
Experts have analyzed the bill and found that the financial benefits are skewed heavily towards the wealthy. The Congressional Budget Office estimates that income for the bottom tenth of households would decrease by 2% in 2027 and 4% in 2033, while those in the top 10% would see a 4% increase in 2027 and a 2% increase in 2033. Similarly, a Yale Budget Lab analysis revealed that the bottom fifth of households could see an $800 decrease in annual income in 2027, while the top 20% could see a $9,700 increase, with the top 1% gaining $63,000.
The House bill primarily benefits high-earners due to valuable tax breaks related to business income, state and local taxes, and the estate tax. These tax breaks disproportionately benefit the wealthy, with 60% of the bill’s tax cuts going to the top 20% of households and over a third going to those making $460,000 or more. The bill also preserves a lower top tax rate and a tax break for investors funneling money into “opportunity zones.”
However, despite the overall tax cuts, low-income households may end up worse off due to reductions in social safety net programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP). The bill imposes work requirements for Medicaid and SNAP beneficiaries, leading to cuts in federal spending on these programs. While some low-income households may see slight benefits if they do not rely on these programs, those who do could face financial hardships.
Overall, the House bill highlights the growing income inequality in the United States, with the wealthy benefiting more from tax cuts while low-income households bear the brunt of reductions in social welfare programs. As the bill heads to the Senate for further consideration, the debate over its impact on different income groups is likely to continue. A recent analysis conducted by Penn Wharton revealed that households in the United States would receive approximately 65% of the total value of a new legislative bill. This legislation, which is currently under consideration, aims to provide financial relief to American families and boost the economy.
Interestingly, the analysis also highlighted that a subset of high earners, specifically 17% of the top 1% of households earning at least $1.1 million annually, would actually end up paying more in taxes. This finding was based on data from the Tax Policy Center, which pointed to certain limitations on deductions for top-bracket households as a contributing factor.
Howard Gleckman, a senior fellow at the Tax Policy Center, explained that the increased tax burden on some high-income individuals was partially due to restrictions on the deductibility of state and local taxes for certain pass-through businesses. Additionally, there is an overall cap on deductions for households in the top tax bracket.
Overall, the analysis sheds light on the distributional effects of the proposed legislation, revealing that a majority of households stand to benefit from the financial relief measures outlined in the bill. While some high earners may face higher tax liabilities, the overarching goal of the legislation is to provide much-needed support to American families and stimulate economic growth.
In conclusion, the findings of the Penn Wharton analysis underscore the importance of carefully considering the impact of legislative measures on different income groups. By ensuring that the benefits of the legislation are distributed equitably, policymakers can work towards fostering a more inclusive and resilient economy for all Americans.
