The recently passed House Republican tax and spending package, dubbed the “One Big Beautiful Bill Act,” reveals a stark disparity in who stands to gain from its provisions.
Analysis from multiple economic experts shows the legislation overwhelmingly benefits America’s wealthiest households while potentially harming those with the lowest incomes.
A tale of two economies
The Congressional Budget Office’s nonpartisan analysis paints a troubling picture of the bill’s impact.
By 2027, households in the bottom 10% of earners would see their income fall by 2%, worsening to a 4% decline by 2033, primarily because of cuts to Medicaid and food stamps.
Meanwhile, those in the top 10% would enjoy income increases of 4% in 2027 and 2% in 2033.
How the wealthy benefit
The legislation creates multiple avenues for high-income households to improve their finances. The bill includes tax cuts benefiting business owners, investors, and homeowners in high-tax areas.
It also contains provisions affecting the estate tax and income tax rates that disproportionately advantage those with greater wealth.
While the Tax Policy Center notes that over 80% of households would receive some form of tax cut in 2026 if the bill becomes law, the size of these benefits varies dramatically by income level.
Cutting the safety net to pay for tax cuts
To partially cover the estimated $4 trillion cost of these tax cuts, the bill proposes significant reductions to social programs that primarily serve lower-income Americans.
The spending package includes cuts to Medicaid (approximately $700 billion through 2034) and the Supplemental Nutrition Assistance Program, formerly known as food stamps (about $267 billion over the same period).
The legislation also imposes stricter work requirements for beneficiaries of these programs, which could further reduce access for vulnerable populations.
Looking beneath the surface
Some provisions that initially appear beneficial to lower-income Americans may offer less value upon closer examination. For example, the bill includes a tax break on tip income structured as a tax deduction.
However, according to Yale Budget Lab director Ernie Tedeschi, roughly one-third of tipped workers don’t pay federal income tax, meaning they wouldn’t benefit from this provision.
The bill does include some measures aimed at middle and lower-income households, such as an enhanced child tax credit, a higher standard deduction, and tax breaks related to car loan interest. However, these benefits are often temporary or limited compared to the permanent advantages extended to wealthier Americans.
What happens next
Having narrowly passed the House, the legislation now moves to the Senate, where it could undergo further modifications. Whatever its final form, the current version’s distributional effects represent a clear policy choice about which Americans should benefit most from tax reform.
Kent Smetters, an economist and faculty director at the Penn Wharton Budget Model, notes that low-income Americans who don’t rely on programs like SNAP, Medicaid, or ACA premium support would be “slightly better off.” However, for the millions who do depend on these safety net programs, the legislation could mean a significant financial setback.
And this bill is passing just as many economists are already voicing concerns about the regressive nature of recent tariff policies, suggesting a pattern of economic policies that may further widen America’s wealth gap.
Add a Comment