Personal Finance

Who benefits from Trump Tax Cuts and Jobs Act extension

Published

12 hours ago

March 3, 2025

Speaker of the House Mike Johnson (R-LA) leaves after the House passed Republicans’ budget resolution on the spending bill on Feb. 25, 2025 in Washington.

Kayla Bartkowski | Getty Images News | Getty Images

As Congress debates how to handle trillions of dollars in expiring tax breaks, lawmakers on both sides have been lobbing claims about which consumers will see the biggest benefits from extending them. Economists and tax experts say the answer isn’t so straightforward.

In short: Who benefits depends on your frame of reference.

House Republicans passed a budget plan Tuesday that lays the groundwork to extend the Tax Cuts and Jobs Act, a package of tax cuts enacted in 2017 during President Trump’s first term.

Many of the cuts for individual taxpayers will expire after 2025 unless Congress acts — and the GOP can do this with a simple majority vote in Congress by using a special legislative maneuver called budget reconciliation.

Rep. Richard Neal, D-Mass., ranking member of the House Ways and Means tax committee, said Wednesday that Republicans’ policy plan — central to which is an extension of the Trump tax cuts, estimated to cost more than $4 trillion — amounts to a “reverse Robin Hood scam” that gives to the rich and takes from the poor.

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Meanwhile, Republicans say low- and middle-income households stand to win under the plan.

“Extending the Trump tax cuts delivers the biggest relief to working-class Americans and small businesses in a generation,” Rep. Jason Smith, R-Missouri, chairman of the Ways and Means Committee, said Tuesday.

Experts say both sides’ arguments have merit.

“The interesting thing is both can be true, depending on how you interpret what they’re saying,” said James Hines, a law and economics professor at the University of Michigan and research director in its Office of Tax Policy Research.

The Trump law cut taxes for most people

President Trump speaks about the passage of tax reform legislation on the South Lawn of the White House on Dec. 20, 2017.

Saul Loeb | Afp | Getty Images

The Tax Cuts and Jobs Act lowered taxes for most U.S. households, experts said.

The legislation was broad, benefiting Americans across the income spectrum — which is broadly consistent with Republicans’ claims, they said.

Changes like a larger child tax credit and an expanded standard deduction cut income taxes for many low and middle earners, while lower marginal tax rates and tax deductions for business owners largely helped the wealthy, experts said.

If TCJA provisions are extended, 62% of tax filers would see lower tax bills in 2026, compared to if the measures expire, according to the Tax Foundation. (Put another way, many people’s tax bills would increase next year without an extension.)

With those provisions in place, Americans would get a 2.9% boost in income after taxes in 2026, on average, according to the Tax Foundation. Income would rise by 3.4% if factoring in broader impacts of the tax cut on the U.S. economy, it said.

A U.S. Treasury Department report issued in the waning days of the Biden administration had a similar finding: The average person would get a 2.2% tax cut by extending the Trump law. (Its estimate is for the 2025 budget year.)

All income groups would get a boost in after-tax income, Treasury said.

The rich are the ‘biggest winners’

U.S. House Minority Leader Hakeem Jeffries (D-NY), joined by Rep. Pete Aguilar (D-CA) and Rep. Katherine Clark (D-MA), delivers remarks after the House passed Republicans’ budget resolution on the spending bill on Feb. 25, 2025.

Kayla Bartkowski | Getty Images News | Getty Images

However, with an extension, the largest tax cuts would accrue to the highest-income families, Treasury said.

Household in the top 5% — who earn over $450,000 a year, roughly — are the “biggest winners,” according to a July 2024 analysis by the Urban-Brookings Tax Policy Center. They’d get over 45% of the benefits of extending the Tax Cuts and Jobs Act, it said.

A Penn Wharton Budget Model analysis on the impacts of the broad Republican tax plan had a similar finding.

The bottom 80% of income earners would get 29% of the total value of proposed tax cuts in 2026, according to the Wharton analysis, issued Thursday. The top 10% would get 56% of the value, it said.

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This dynamic speaks to Democrats’ arguments, especially when coupled with possible spending cuts for programs like Medicaid and food stamps. Such programs largely benefit lower earners.

Wharton estimates that the combination of tax cuts and spending reductions for programs like Medicaid and food stamps would leave “low-income households worse off,” even after accounting for economic growth.

Some tax analysts view after-tax income as among the best frames of reference to assess policy impact, because it estimates how much a household’s buying power improves. Others disagree, however, saying it’s hard to control for other economic variables that might alter income.

The top 1% of households (who make about $1 million or more a year) would get a 3.2% boost in after-tax income in 2027 via an extension of the Trump law, the Tax Policy Center said. In dollar terms, their tax savings would be about $70,000, on average.

By comparison, middle-income households, would get a 1.3% income boost, or a $1,000 tax cut, according to the Tax Policy Center.

The rich ‘pay most of the taxes’

In a sense, this dynamic is to be expected because the U.S. income-tax system is progressive, experts said. That means high earners generally shoulder more of the overall tax burden than low earners.

“If you ask, ‘Who gets the dollars,’ it’s mostly rich taxpayers,” said Hines of the University of Michigan. “But that’s because it’s a tax cut and they pay most of the taxes.”

The top 1% paid 40% of all U.S. income taxes collected in 2022, according to a recent Tax Foundation analysis. The bottom 90% paid about a quarter — 28% — of total income tax.

“Democrats say most of the tax dollars went to the rich: They’re absolutely correct,” Hines said.

However, the TCJA cut taxes more for working families than rich families on a proportional basis, a White House spokesperson said.

Experts agreed with that assessment.

“Republicans say, ‘But the cuts were not slanted to the rich compared to how much people were paying originally,” which is also generally correct, Hines said.

President Donald Trump holds up a copy of legislation he signed before before signing the tax reform bill into law in the Oval Office Dec. 22, 2017.

Chip Somodevilla | Getty Images News | Getty Images

For example, the bottom 50% of Americans saw their average federal tax rate fall by 15% from 2017 to 2018, after the Trump tax cut took effect, according to the Tax Foundation. (Their rate fell to 3.4% from 4%.)

By contrast, the top 1% saw their average rate decline by a lesser percentage (about 5%) during that period, to 25.4% from 26.8%.

“The reason why the debate is so fractured is there are elements of truth to both sides,” said Garrett Watson, director of policy analysis at the Tax Foundation. “It’s a battle of metrics, and what weight to place on each of them.”

Personal Finance

Social Security plans to cut about 7,000 workers. That may affect benefits

Published

3 hours ago

March 3, 2025

Business Finance News

The Social Security Administration office in Brownsville, Texas.

Robert Daemmrich Photography Inc | Corbis Historical | Getty Images

The Social Security Administration plans to shed 7,000 employees as the Trump administration looks for ways to cut federal spending.

The agency on Friday confirmed the figure — which will bring its total staff down to 50,000 from 57,000.

Previous reports that the Social Security Administration planned for a 50% reduction to its headcount are “false,” the agency said.

Nevertheless, the aim of 7,000 job cuts has prompted concerns about the agency’s ability to continue to provide services, particularly benefit payments, to tens of millions of older Americans when its staff is already at a 50-year low.

“It’s going to extend the amount of time that it takes for them to have their claim processed,” said Greg Senden, a paralegal analyst who has worked at the Social Security Administration for 27 years.

“It’s going to extend the amount of time that they have to wait to get benefits,” said Senden, who also helps the American Federation of Government Employees oversee Social Security employees in six central states.

Officials at the White House and the Social Security Administration were not available for comment at press time.

The Social Security Administration on Friday said it anticipates “much of” the staff reductions needed to reach its target will come from resignations, retirement and offers for Voluntary Separation Incentive Payments, or VSIP.

More reductions could come from “reduction-in-force actions that could include abolishment of organizations and positions” or reassignments to other positions, the agency said. Federal agencies must submit their reduction-in-force plans by March 13 to the Office of Personnel Management for approval.

Cuts may affect benefit payments, experts say

Former Social Security Administration Commissioner Martin O’Malley last week told CNBC.com that the continuity of benefit payments could be at risk for the first time in the program’s history.

“Ultimately, you’re going to see the system collapse and an interruption of benefits,” O’Malley said. “I believe you will see that within the next 30 to 90 days.”

Other experts say the changes could affect benefits, though it remains to be seen exactly how.

“It’s unclear to me whether the staff cuts are more likely to result in an interruption of benefits, or an increase in improper payments,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University and a former public trustee for Social Security and Medicare.

Improper payments happen when the agency either overpays or underpays benefits due to inaccurate information.

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With fewer staff, the Social Security Administration will have to choose between making sure all claims are processed, which may lead to more improper payments, or avoiding those errors, which could lead to processing delays, Blahous said.

Disability benefits, which require more agency staff attention both to process initial claims and to continue to verify beneficiaries are eligible, may be more susceptible to errors compared to retirement benefits, he added.

Cuts may have minimal impact on trust funds

Under the Trump administration, Social Security also plans to consolidate its geographic footprint to four regions down from 10 regional offices, the agency said on Friday.

Ultimately, it remains to be seen how much savings the overall reforms will generate.

The Social Security Administration’s funding for administrative costs comes out of its trust funds, which are also used to pay benefits. Based on current projections, the trust funds will be depleted in the next decade and Social Security will not be able to pay full benefits at that time, unless Congress acts sooner.

The efforts to cut costs at the Social Security Administration would likely only help the trust fund solvency “in some miniscule way,” said Andrew Biggs, senior fellow at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration.

What President Donald Trump is likely looking to do broadly is reset the baseline on government spending and employment, he said.

“I’m not disagreeing with the idea that the agency could be more efficient,” Biggs said. “I just wonder whether you can come up with that by cutting the positions first and figuring out how to have the efficiencies later.”

Personal Finance

Student loan borrowers pursuing PSLF are ‘panicking.’ Here’s what to know

Published

4 hours ago

March 3, 2025

Business Finance News

Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

As the Trump administration overhauls the student loan system, many borrowers pursuing the Public Service Loan Forgiveness program are worried about its future.

“There’s a lot of panicking by PSLF borrowers due to the uncertainty,” said higher education expert Mark Kantrowitz.

PSLF, which President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.

Here’s what borrowers in the program need to know about recent changes affecting the program.

IDR repayment plan applications down

Some borrowers’ PSLF progress has stalled

While the legal challenges against SAVE were playing out, the Biden administration paused the payments for enrollees through a forbearance, as well as the accrual of any interest.

Unlike the payment pause during the pandemic, borrowers in this forbearance aren’t getting credit toward their required 120 payments for loan forgiveness under PSLF. It’s unclear when the forbearance will end.

But while the applications for other IDR plans remain unavailable, borrowers in SAVE are stuck on their timeline toward loan forgiveness, Kantrowitz said. If you were on an IDR plan other than SAVE, you will continue to get credit during this period if you’re making payments and working in eligible employment.

The Education Department is now tweaking the applications to make sure all their repayment plans comply with the new court order, an agency spokesperson told CNBC last week.

It will likely be months before the Department has reworked all the applications and made them available again, Kantrowitz said.

Those who switch to the Standard plan will continue to get PSLF credit, but the payments are often too high for those working in the public sector or for a nonprofit to afford, experts said.

‘Buy back’ opportunity can help

While it’s frustrating not to be inching toward loan forgiveness for the time being, an option down the road may help, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

The Education Department’s Buyback opportunity lets people pay for certain months that didn’t count, if doing so brings them up to 120 qualifying payments.

For example, time spent in forbearances or deferments that suspended your progress can essentially be cashed in for qualifying payments.

The extra payment must total at least as much as what you have paid monthly under an IDR plan, according to Studentaid.gov.

Borrowers who’ve now been pursuing PSLF for 10 years or more should put in their buyback request sooner than later, Kantrowitz said.

“The benefit is likely to be eliminated by the Trump administration,” he said.

Keep records

Borrowers have already long complained of inaccurate payment counts under the PSLF program. While the student loan repayment options are tweaked, people could see more errors, Kantrowitz said.

“A borrower’s payment history and other student loan details are more likely to get corrupted during a transition,” he said.

As a result, he said, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov.

“It would also be a good idea to create a spreadsheet showing all of the qualifying payments so they have their own count,” Kantrowitz said.

With the PSLF help tool, borrowers can search for a list of qualifying employers and access the employer certification form. Try to fill out this form at least once a year, Kantrowitz added.

Personal Finance

Treasury Department halts enforcement of BOI reporting for businesses

Published

7 hours ago

March 3, 2025

Business Finance News

The US Treasury building in Washington, DC, US, on Monday, Jan. 27, 2025.

Stefani Reynolds | Bloomberg | Getty Images

The U.S. Department of the Treasury on Sunday announced it won’t enforce the penalties or fines associated with the Biden-era “beneficial ownership information,” or BOI, reporting requirements for millions of domestic businesses.

Enacted via the Corporate Transparency Act in 2021 to fight illicit finance and shell company formation, BOI reporting requires small businesses to identify who directly or indirectly owns or controls the company to the Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

After previous court delays, the Treasury in late February set a March 21 deadline to comply or risk civil penalties of up to $591 a day, adjusted for inflation, or criminal fines of up to $10,000 and up to two years in prison. The reporting requirements could apply to roughly 32.6 million businesses, according to federal estimates.

The rule was enacted to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.

In addition to not enforcing BOI penalties and fines, the Treasury said it would issue a proposed regulation to apply the rule to foreign reporting companies only.

President Donald Trump praised the news in a Truth Social post on Sunday night, describing the reporting rule as “outrageous and invasive” and “an absolute disaster” for small businesses.

Other experts say the Treasury’s decision could have ramifications for national security.

“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” Scott Greytak, director of advocacy for anticorruption organization Transparency International U.S., said in a statement.

Greg Iacurci contributed to this reporting.