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institute on taxation and economic policy
GOP Megalaw Will Mean Tax Hikes for Many Poor Americans as Soon as 2026: Analysis
But the lawmakers also allowed an enhancement of tax credits that helped millions of Americans pay for health insurance to expire and those effects will be felt much sooner, according to a study published Tuesday by the nonpartisan Institute on Taxation and Economic Policy (ITEP)
That enhancement—passed in 2021 as part of the American Rescue Plan and extended until 2025 by the Inflation Reduction Act—provided nearly 20 million low- and moderate-income Americans who purchased health insurance on state and federal exchanges with tax relief that significantly shrunk their insurance premiums.
According to the Center on Budget and Policy Priorities, recipients saved over $700 on average on their insurance premiums as a result of the tax breaks.
Largely as a result of this policy change, the ITEP study projects that the poorest 20% of Americans will end up paying $140 more on average than they paid before the law passed as soon as next year. The next poorest 20% will end up paying $100 more.
(Chart: Institute on Taxation and Economic Policy)
An estimated 4.2 million are also expected to lose health insurance as a result of the change, according to the Congressional Budget Office (CBO), adding to the 10 million it estimates will lose insurance due to Medicaid cuts.
This does not even take into account the effects of President Donald Trump's regressive tariffs, which will also hit the poorest Americans hardest by increasing the cost of goods.
"The central fiscal priority in the megabill is to reward the wealthiest Americans with even more tax cuts, but to try to disguise that as a boon for working families," Jon Whiten, the deputy director of ITEP told Common Dreams.
A previous ITEP estimate found that for everyone except the top 20% of Americans, the cost of the tariffs will either largely offset or surpass the amount they'll save due to the tax breaks in the law.
(Chart: Institute on Taxation and Economic Policy)
Meanwhile, the law is estimated to give the richest 1% of Americans $117 billion in tax cuts next year. That amount far exceeds the tax savings of the bottom 60% of Americans put together, who will cumulatively save just $77 billion.
The report found that even foreign investors who own shares in U.S. companies will benefit more in 2026 than many of the poorest Americans due to the law's extension of corporate tax breaks: They will receive $32 billion in tax cuts in 2026 compared to just $1.5 billion for the bottom 20% of Americans.
"This bill is already very unpopular, and most Americans see it for what it is: a big boost for the richest folks and not much for anyone else," said Whiten.
According to polling last week by the Associated Press-NORC Center for Public Affairs Research, 6 in 10 Americans believe the law will do more to hurt than help lower-income people.
Whiten added, "People are likely to continue to sour on it as they learn more about it and see how it impacts their family finances."
Nonpartisan Analysis Confirms: GOP Tax Cuts Would Come Nowhere Close to Paying for Themselves
Economic activity spurred by the tax breaks—which are largely an extension of soon-to-expire provisions of the 2017 Trump-GOP tax cuts—would increase federal revenues by roughly $103 billion between 2025 and 2034, according to JCT.
That would barely put a dent in the overall projected cost of the tax cuts, bringing it down to $3.7 trillion from $3.8 trillion.
"I'm sorry, it is so funny that JCT says the GOP tax provisions pay for only 2.7% of themselves," Bobby Kogan, senior director of federal budget policy at the Center for American Progress, wrote in response to the analysis. "Republicans are out here pretending their tax bill will be the single greatest boost to the economy ever, and JCT says they only get a minuscule boost."
A separate analysis published Thursday by the Institute on Taxation and Economic Policy (ITEP) shows that the benefits of the Republican bill's tax provisions would flow disproportionately to the wealthiest Americans.
"The $121 billion in net tax cuts going to the richest 1% next year would exceed the amount going to the entire bottom 60% of taxpayers (about $90 billion)," said ITEP, whose analysis did not factor in the impact of the legislation's unparalleled cuts to Medicaid and federal nutrition assistance, which would deliver a major blow to the household resources of lower-income Americans.
Amy Hanauer, ITEP's executive director, said Thursday that "it's not surprising that this bill was written behind closed doors and rushed through in the night before Americans had a chance to see what it contains."
"This bill extends enormous tax cuts to those who have the most," said Hanauer. "It will increase inequality, reduce health coverage, and take food from people's tables, all to shower the wealthiest people in this country and foreign investors with tax breaks. In the end, this reconciliation bill redistributes resources up the income scale, widening the already-huge chasm between the rich and the rest of us."
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