Trump Tax Bill Expected to Widen Economic Disparity

Analysis projects tax cuts will benefit the affluent while burdening low-income households.

A recently passed tax and spending bill in the US House of Representatives is predicted to have a polarizing effect on the economy. A new analysis reveals the measure will likely increase the financial gap between the wealthiest and poorest Americans. The bill includes tax cuts and reforms that will redistribute financial resources.

Impact on Households

The Congressional Budget Office (CBO) published an analysis examining the tax bill’s impact. Households in the lowest income bracket are estimated to lose an average of $1,600 annually, roughly 3.9% of their income. The primary factors contributing to this loss are cuts to Medicaid and food assistance programs.

Conversely, the wealthiest 10% of households are anticipated to gain an average of $12,000 each year, equating to a 2.3% income boost. The CBO report attributes this increase to a decrease in tax payments. Middle-income families are expected to see a more modest increase, between $500 and $1,000 annually.

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“This tax bill includes extending tax cuts that were passed in 2017 and are scheduled to expire at the end of the year, as well as providing multiple new tax credits. On the other hand, it also includes reform plans for Medicaid and SNAP, which aim to cut expenditures.”

—Congressional Budget Office, Report

According to the Center on Budget and Policy Priorities, tax cuts tend to exacerbate income inequality, as the wealthy benefit more from them, and cuts to social programs disproportionately affect low-income families (Source 2024).

Bill’s Provisions

The tax bill proposes to extend tax cuts enacted in 2017, slated to expire this year. It also introduces new tax credits. Simultaneously, it includes reforms to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), aiming to reduce spending. These reforms aim to cut expenditures.

The CBO previously predicted that, without accounting for “dynamic effects,” the legislation would add $2.4 trillion to the US budget deficit over the next ten years. The tax bill’s economic effects underscore the potential for widening economic disparity, impacting various income levels differently.