Finance
House Republican ‘big beautiful’ tax bill favors the rich
House Speaker Mike Johnson speaks to the media after the House narrowly passed a budget bill forwarding President Donald Trump’s agenda at the U.S. Capitol in Washington, May 22, 2025.
Kevin Dietsch | Getty Images
There’s a stark contrast between high-earners and low-income households in a sprawling legislative package House Republicans passed on Thursday.
The bulk of the financial benefits in the legislation — called the “One Big Beautiful Bill Act” — would flow to the wealthiest Americans, courtesy of tax-cutting measures like those for business owners, investors and homeowners in high-tax areas, experts said.
However, low earners would be worse off, they said. That’s largely because Republicans partially offset those tax cuts — estimated to cost about $4 trillion or more — with reductions to social safety net programs like Medicaid and the Supplemental Nutrition Assistance Program, or SNAP.
The tax and spending package now heads to the Senate, where it may face further changes.
‘It skews pretty heavily toward the wealthy’
The Congressional Budget Office, a nonpartisan federal scorekeeper, estimates income for the bottom tenth of households would fall by 2% in 2027 and by 4% in 2033 as a result of the bill’s changes.
By contrast, those in the top 10% would get an income boost from the legislation: 4% in 2027 and 2% in 2033, CBO found.
A Yale Budget Lab analysis found a similar dynamic.
The bottom fifth of households — who make less than $14,000 a year — would see their annual incomes fall about $800 in 2027, on average, Yale estimates.
The top 20% — who earn over $128,000 a year — would see theirs grow by $9,700, on average. The top 1% would gain $63,000.
The Yale and CBO analyses don’t account for last-minute changes to the House legislation, including stricter work requirements for Medicaid.
“It skews pretty heavily toward the wealthy,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.
The legislation compounds the regressive nature of the Trump administration’s recent tariff policies, economists said.
“If you incorporated the [Trump administration’s] hike in tariffs, this would be even more skewed against lower- and working-class families,” Tedeschi said.
Most bill tax cuts go to top-earning households
There are several reasons the House bill skews toward the wealthiest Americans, experts said.
Among them are more valuable tax breaks tied to business income, state and local taxes and the estate tax, experts said.
These tax breaks disproportionately flow to high earners, experts said. For example, the bottom 80% of earners would see no benefit from the House proposal to raise the SALT cap to $40,000 from the current $10,000, according to the Tax Foundation.
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The bill also preserves a lower top tax rate, at 37%, set by the 2017 Tax Cuts and Jobs Act, which would have expired at the end of the year.
It kept a tax break intact that allows investors to shield their capital gains from tax by funneling money into “opportunity zones.”
Trump’s 2017 tax law created that tax break, aiming to incentivize investment in lower-income areas designated by state governors. Taxpayers with capital gains are “highly concentrated” among the wealthy, according to the Tax Policy Center.
All told, 60% of the bill’s tax cuts would go to the top 20% of households and more than a third would go to those making $460,000 or more, according to the Tax Policy Center.
“The variation among income groups is striking,” the analysis said.
Why many low earners are worse off
That said, more than eight in 10 households overall would get a tax cut in 2026 if the bill is enacted, the Tax Policy Center found.
Lower earners get various tax benefits from a higher standard deduction and temporarily enhanced child tax credit, and tax breaks tied to tip income and car loan interest, for example, experts said.
However, some of those benefits may not be as valuable as at first glance, experts said. For example, roughly one-third of tipped workers don’t pay federal income tax, Tedeschi said. They wouldn’t benefit from the proposed tax break on tips — it’s structured as a tax deduction, which doesn’t benefit households without tax liability, he said.
Meanwhile, lower-income households, which rely more on federal safety net programs, would see cuts to Medicaid, SNAP (formerly known as food stamps), and benefits linked to student loans and Affordable Care Act premiums, said Kent Smetters, an economist and faculty director at the Penn Wharton Budget Model.
The House bill would, for example, impose work requirements for Medicaid and SNAP beneficiaries. Total federal spending on those programs would fall by about $700 billion and $267 billion, respectively, through 2034, according to the Congressional Budget Office analysis.
That said, “if you are low income and don’t get SNAP, Medicaid or ACA premium support, you will be slightly better off,” Smetters said.
Some high earners would pay more in tax
In a sense, it may not be surprising most tax benefits accrue to the wealthy.
The U.S. has among the most progressive tax systems in the developed world, Smetters said.
The top 10% of households pay about 70% of all federal taxes, he said. Such households would get about 65% of the total value of the legislation, according to a Penn Wharton analysis published Monday.
A subset of high earners — 17% of the top 1% of households, who earn at least $1.1 million a year — would actually pay more in tax, according to the Tax Policy Center.
“In part this is due to limits on the ability of some pass-through businesses to fully deduct their state and local taxes and a limit on all deductions for top-bracket households,” wrote Howard Gleckman, senior fellow at the Tax Policy Center.
Finance
Goolsbee says Fed now has to wait longer before moving rates because of trade policy uncertainty
Chicago Federal Reserve President Austan Goolsbee said Friday that President Donald Trump’s latest tariff threats have complicated policy and likely put off changes to interest rates.
In a CNBC interview, the central bank official indicated that while he still sees the direction of rates being lower, the Fed likely will be on hold as it evaluates the ever-changing trade policy and how it impacts inflation and employment.
“Everything’s always on the table. But I feel like the bar for me is a little higher for action in any direction while we’re waiting to get some clarity,” Goolsbee said on “Squawk Box” when asked about Trump’s new actions Friday morning. “Over the longer run, if they’re putting in place tariffs that have a stagflationary impact … then that’s the central bank’s worst situation.”
“So I think we’ll have to see how big the impacts on prices are,” he added. “I know people hate inflation.”
Goolsbee spoke as Trump jolted markets again with a call for 50% tariffs on products from the European Union starting June 1 while indicating Apple will have to pay a 25% tariff on iPhones not made in the U.S. Apple mostly makes its coveted smartphones in China, though there is some production in India as well.
While the impact of a costlier iPhone likely wouldn’t mean much from a larger economic perspective, the saber-ratting underscores the volatility of trade policy and provides another flash point for a market already unnerved by worries about fiscal policy that have sent bond yields sharply higher.
Central bankers are generally careful not to wade into issues of fiscal and trade policy, but are left to analyze their repercussions.
Goolsbee said he is still optimistic that the longer-run trajectory is towards solid economic growth before Trump’s April 2 tariff announcement that rattled markets.
“I’m still underneath hopeful that we can get back to that environment, and 10 to 16 months from now, rates could be a fair bit below where they are today,” he said.
Goolsbee is a voting member this year on the rate-setting Federal Open Market Committee, which next meets June 17-18. At the meeting, officials will get a chance to update their economic and interest rate projections. The last update, in March, saw the committee indicating two rate cuts this year.
Markets expect the Fed will cut twice this year, with the next move not happening until September. Goolsbee did not commit to a course of action from here amid the uncertainty.
“I don’t like even mildly tying our hands at the next meeting, much less over six, eight, 10 meetings from now,” he said. “That said, as we went into April 2, I believe that we’re at pretty stable full employment, that inflation was on a path back to 2% and if we could do those I thought that over the next 12 to 18 months, rates could come down a fair amount.”
The Fed’s benchmark overnight borrowing rate is targeted between 4.25%-4.5%, where it has been since December. The actual rate most recently traded at 4.33%.
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