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With the Republican-controlled Congress moving forward with President Donald Trump’s call to extend the 2017 individual tax cuts, Democrats and Republicans are spinning the facts about who would benefit. Several Democrats have framed the tax cuts as exclusively benefiting billionaires, while Trump has suggested everyone in America would see a tax cut.
On average, taxpayers in every income group would get some tax relief. But not everyone. In all, about two-thirds to three-quarters of taxpayers would get a tax cut, according to independent analyses. Also, the cuts skew in favor of wealthy Americans, who would see more tax relief not only in the dollar amount but as a percentage of income, on average. But again, the wealthy wouldn’t be the only ones to benefit.
(For clarity, people would experience an extension not as a tax cut but as the absence of a tax increase if the provisions were allowed to expire.)
Some economists also warn that if the GOP plan includes spending cuts to Medicaid and Supplemental Nutrition Assistance Program benefits (or food stamps), lower-income Americans would, on net, fare worse, even with the tax cuts.
In order to pass the 2017 Tax Cuts and Jobs Act with a simple majority in the Senate, Republicans had to use a process called reconciliation — which means the law could not add to the deficit after 10 years. To meet that requirement, most of the individual tax cuts are set to expire at the end of 2025.
The 2017 law lowered marginal tax rates, increased the standard deduction and eliminated the personal exemption, increased the child tax credit, limited deductions for state and local taxes as well as mortgages and home equity lines of credit, and increased the threshold for estate taxes, among other measures.
Republicans are turning to reconciliation again to extend the tax cuts beyond this year. On Feb. 25, House Republicans took the first step in doing that. They narrowly passed a budget resolution that would allow for $4.5 trillion in tax cuts over 10 years and $2 trillion in spending reductions over the same time period.
The resolution didn’t specify what spending cuts would be made, but there’s little doubt Medicaid would face cuts under the framework, as we’ve explained. Both houses of Congress need to agree on a budget resolution before any specific spending reductions would be proposed.
Who Benefits from Tax Cut Extension?
When the TCJA passed in 2017, the expiring nature of some of the tax cuts led to the oft-repeated, but misleading talking point from Democrats that the top 1% would get 83% of the tax cuts under the new law. As we wrote, that was only true when or if the individual tax provisions expired. (The top 1% would still benefit from the remaining provisions, such as a reduction in the corporate tax rate.)
Now, some Democrats are claiming or suggesting that if the individual tax cuts are extended — as the Republican budget blueprint seeks to do — mostly or only the wealthiest Americans would benefit.
In her response to Trump’s address to Congress on March 4, Democratic Sen. Elissa Slotkin said, “President Trump is trying to deliver an unprecedented giveaway to his billionaire friends. He’s on the hunt to find trillions of dollars to pass along to the wealthiest in America.”
In an interview on CNBC on Feb. 25, Democratic Rep. Frank Pallone went further, wrongly claiming that the “average person” would not benefit from the tax cuts included in the Republican budget plan.
Pallone said the Republican tax plan “basically, you know, just helps the very wealthy and large corporate interests.” Advocating allowing the tax cuts to expire, Pallone added, “I don’t think that the average person benefits from this tax cut.”
“The bottom line is the Republicans are doing nothing to try to provide any kind of tax cut or help for the average American,” Pallone said. “It’s all about corporate interests, large corporate interests, billionaires. That’s what this is all about.”
Trump framed the tax cuts much differently in his address to Congress on March 4.
“The next phase of our plan to deliver the greatest economy in history is for this Congress to pass tax cuts for everybody,” Trump said. “They’re in there, they’re waiting for you to vote.”
An Urban-Brookings Tax Policy Center analysis of extending all of the TCJA tax cuts concluded that “on average, all income groups would get a tax cut.”
Contrary to Pallone’s claim about the “average person” not benefiting from the extension of TCJA tax cuts, the average taxpayer — defined as the middle 20% of income earners (those earning between $65,100 and $116,400) — would see an average tax cut of $1,030 in 2027, or about 1.3% of after-tax income.
A spokesman for Pallone noted that the average tax cut for someone making under $50,000 would be $273, according to the Joint Committee on Taxation, while the average tax cut for a taxpayer making over $1 million would be $78,717. That wealthy taxpayers would derive more benefit is clear, but most “average” taxpayers would derive some benefit from the tax cuts. The spokesman noted that the tax cuts would not be enough to offset the impact of potential spending cuts to Medicaid and other programs.
That taxpayers in every income category would see tax cuts was echoed in an analysis by the Tax Foundation.
“Making all the expiring provisions permanent, including the estate and business provisions, would increase after-tax incomes by 2.9 percent on average in 2026,” Erica York, vice president of federal tax policy with the Tax Foundation’s Center for Federal Tax Policy, told us via email. “The top quintile would see a 3.3 percent increase on average, while the bottom quintile would see a 2.8 percent increase on average. So while the policies would provide a larger increase in after-tax income to higher income taxpayers, they also provide tax cuts to taxpayers across the income spectrum.”
And contrary to Trump’s statement, his tax plans would not result in tax cuts for everybody.
Overall, about three-quarters of households would get a tax cut, while about 10% would get a tax increase, according to the Tax Policy Center analysis. The percentage of winners and losers would vary by income category, TPC found: “About 86% of middle-income households would get a tax cut” while “about 13% would see their taxes rise.” Among the top 1%, “taxes would fall for about 81%, while they’d rise for 19%.”
That’s only for an extension of the TCJA tax cuts, and Trump has also proposed eliminating taxes on tips, overtime and Social Security benefits. But as Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, told us via email, “almost nobody benefits from tax-free tips” and “tax free Social Security benefits go almost entirely to high-income retirees (since those with low-incomes already pay no tax on their benefits).”
The Tax Foundation estimates that making the expiring individual provisions of the TCJA permanent would translate a tax cut for 62% of tax filers, including for 84% of middle income Americans.
Addressing the House GOP Issues Conference on Jan. 27, Trump said that “we want to keep people’s taxes low and actually make them lower. And that’s not just rich people, that’s everybody. It’s frankly proportionately the lower scale much more so than a higher scale.”
However, wealthy earners would get an outsized share of tax benefits. TPC estimated that households making over $450,000 (the top 5% of households) would be the income group getting the largest percentage of benefits from extending the tax cuts: just over 45%. Moreover, higher earners would see a higher percentage tax cut than middle- and lower-income Americans. The tax cuts would average 3.2% of after-tax income for the top 1% of households, compared with 1.3% for the middle 20% of households.
In that same address, Trump falsely claimed that if the TCJA tax cuts were not permanently extended, “you’re going to have about a 60% tax increase.” The TPC estimates that an extension of the tax cuts would reduce the average tax rate by about 1.4 percentage points in 2027.
In the weekly House Democrats’ press conference on Feb. 25, Democratic Rep. Brendan Boyle said the deep spending cuts proposed in the Republican resolution were being made “to partially pay for trillions of dollars in tax cuts, most of which go to the richest 1% of Americans.”
His point about the share of benefits going to the top 1% is a bit exaggerated. While the tax cuts are tilted toward the wealthy, the richest 1% — households earning over $1 million — would get 23.5% of the benefits from the tax cuts in 2027 — so not most, according to the TPC. Nonetheless, more than half of the benefits would go to the top 10% that year.
In its analysis of the House Republican plan, the Penn Wharton Budget Model reached similar conclusions on the distributional effects of the tax cuts on a conventional basis (before the economic impact of the tax cuts are factored in).
“On a conventional basis in 2026, the first 80 percent of the income distribution receives about 29 percent of the total value of the proposed tax cuts while the top 10 percent of the income distribution receives about 56 percent of the value,” Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania’s Wharton School, told us via email. He noted that, “under current law, the top 10% of the income distribution pays about 70% of all federal taxes.”
PWBM also considered the results if the tax cuts are paid partially through cuts to Medicaid and SNAP.
If cuts are made to those programs, “then lower income households are worse off,” Smetters said, though he noted that “those decisions have not been made yet.”
As we said, it’s unknown whether the House budget resolution will move forward and what specific spending cuts lawmakers will ultimately propose.
Given the disproportionate effect Medicaid and SNAP cuts would have on lower-income households, “Even with economic growth, lower income households are worse off if mandatory spending cuts, still to be decided under budget reconciliation, are allocated to programs like Medicaid and SNAP,” the PWBM analysis concluded.
Many Democrats — including former President Joe Biden — had also hoped to extend the tax cuts, but only for those making under $400,000 a year. In a House Rules Committee hearing on Feb. 24, Rep. Jim McGovern, the ranking Democrat on the committee, offered several amendments to cap the extension of tax cuts at various income levels — first for those making under $400,000 per year, then at $1 million, then at $100 million, then $1 billion per year. All were rejected along party lines.
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