Kara Sears
President Donald Trump's One Big Beautiful Bill Act has sparked debate about its impact on taxpayers. The bill, signed into law on July 4, extends Trump's first-term tax cuts, funds his border wall, and cuts federal support for safety net programs. While it offers tax breaks and lower tax rates for some, it also reduces benefits and eligibility for others. The bill's massive scope affects a wide range of Americans, including seniors, students, children, and low-income citizens. Critics argue that it disproportionately benefits the wealthy, increases deficits, and undermines investments in critical areas. The tax policy debate continues as policymakers strive for a more progressive and equitable system.
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What You'll Learn
Tax breaks for some, but not all
Trump's tax law, passed in 2017, has been criticised for benefiting the wealthy while providing little relief for low-income households. The law included a range of tax breaks, but these were not equally distributed across all income levels.
The top individual income tax rate was reduced from 39.6% to 37% for married couples with over $600,000 in taxable income. Additionally, the law weakened the AMT (Alternative Minimum Tax), which was designed to ensure that high-income individuals claiming numerous deductions still pay a minimum level of tax. As a result, many affluent households saw significant tax reductions. The law also doubled the estate tax exemption, allowing the wealthiest households to pass on twice as much wealth to their heirs tax-free.
On the other hand, low-income taxpayers are expected to bear a heavier burden due to the law. For instance, those in the lowest 10% of earners are projected to lose an average of $1,600 per year, according to a Congressional Budget Office (CBO) report. The law's impact on social safety net programs, such as cuts to Medicaid and food stamps, will also disproportionately affect low-income Americans.
While the tax law extended some tax breaks, such as the increased child tax credit and the standard deduction, these changes are only temporary. The bill also introduces permanent tax breaks, such as the elimination of income tax on qualified tip income and overtime pay for certain income levels. However, these provisions may not fully offset the losses for low-income households.
The tax law's focus on tax cuts for the wealthy has contributed to a growing national debt. The Congressional Budget Office estimates that the bill will increase the deficit by $3.3 trillion over the next decade. As a result, many Americans may feel the consequences of this growing debt in their daily lives.
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Increased deficit
The 2017 Trump Tax Law, also known as the Tax Cuts and Jobs Act (TCJA), has been criticised for disproportionately benefiting the wealthy and for its failure to deliver on promised economic gains. The law's individual and estate tax cuts are estimated to cost approximately $3.9 trillion from 2026 to 2035, or about $400 billion annually starting in 2027. The Congressional Budget Office (CBO) projected that the TCJA would increase deficits by about $1.5 trillion over ten years, with the latest estimate at almost $2.3 trillion over the same period. The Joint Committee on Taxation (JCT) projected a revenue reduction of $1.65 trillion from 2018 to 2027, resulting in a deficit increase of about $1.9 trillion.
The TCJA's impact on the federal budget has been significant, with official estimates projecting an increase in the federal debt by $1 to $2 trillion. The law's temporary tax cuts, if extended, will further enlarge the debt. The CBO also estimated that the One Big Beautiful Bill Act (OBBBA), signed into law by President Trump in 2025, will increase the deficit by $3.3 trillion over the next decade, with interest costs adding a further $725 billion. The OBBBA is expected to reduce American incomes (GNP) by 0.6%, affecting the country's ability to service its debt.
The 2017 Trump Tax Law has been criticised for its impact on the nation's fiscal health, with revenues needing to rise to address underinvestment in critical areas such as healthcare and national security. The law's permanent corporate tax rate cut has been described as "deeply unpopular," and the tax code continues to enable significant foreign profit-shifting. The tax advantages for the wealthy remain a concern, and the law has been deemed expensive and detrimental to the US revenue base.
The TCJA's defenders argued that the pass-through deduction would stimulate investment and job creation. However, researchers found no evidence of significant economic activity or investment increases. Instead, it encouraged tax gaming, with owners reclassifying their income to qualify for the deduction. The 2017 Trump Tax Law has been characterised as a costly policy mistake, with lawmakers urged to reject the extension of individual and estate tax cuts to prevent persistent deficits.
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Cuts to federal support
The 2017 Trump Tax Law has been criticised for disproportionately benefiting the wealthy, driving up the national debt, and failing to deliver promised economic benefits. The law cut the corporate tax rate from 35% to 21%, reduced individual income tax rates, and expanded the child tax credit. While these changes may have provided tax relief for some, they also resulted in significant revenue losses for the government.
The law's permanent corporate tax rate cut has been particularly controversial, as it has been blamed for encouraging companies to use offshore tax havens, further reducing tax revenues. The law also included a $10,000 cap on deductions for state and local taxes (SALT), which disproportionately affected high-tax states like California, New York, and New Jersey.
The 2017 Trump Tax Law has been estimated to cost the government $1.9 trillion over ten years, on top of the cost of the Bush-era tax cuts that were already in place. This has contributed to an increase in the national debt and has limited the government's ability to invest in high-value areas such as healthcare, infrastructure, and national security.
The law has also been criticised for failing to deliver on its promises. Despite claims that the corporate tax cut would boost economic growth and household income, there is little evidence that these gains have materialised. Instead, the law has been blamed for exacerbating income inequality, with households in the top 1% receiving an average tax cut of more than $60,000 in 2025, compared to less than $500 for households in the bottom 60%.
The latest version of Trump's "One Big Beautiful Bill Act" extends the 2017 tax cuts and includes additional tax breaks, such as no taxes on tips, overtime pay, and Social Security benefits for retirees. However, it also includes cuts to federal support for social safety net programs that help Americans afford food and health insurance. These cuts could have significant impacts on state governments and local economies, particularly in rural and underserved areas.
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Skewed to the rich
The 2017 Trump Tax Law has been criticized for being skewed in favor of the rich, with the top 1% receiving large tax cuts. The law delivered the largest average tax cut, as a percentage of pre-tax income, to households in the 95-99th percentiles. This group saw a tax cut of around 3.2% of their pre-tax income, or approximately $13,000 on average. In contrast, the bottom 60% experienced an average income gain of just 1%.
The tax cuts have also been criticized for failing to deliver on their promised economic benefits. While Trump Administration officials claimed that the corporate tax rate cut would lead to a boost in household income, new research shows that workers earning less than $114,000 saw no change in earnings, while top executive salaries increased significantly. The tax law's pass-through deduction, which favored wealthy business owners, has also been criticized for failing to benefit workers who aren't owners.
The tax system needs to raise more revenue from wealthy individuals and profitable corporations to offset tax cuts for those with incomes below $400,000 and to finance investments in people and communities. The 2017 Trump Tax Law has been described as a costly policy mistake, with estimates suggesting that making the individual and estate tax cuts permanent could cost approximately $3.9 trillion from 2026 to 2035, or about $400 billion annually starting in 2027.
The tax cuts enacted under Trump, as well as those under President Bush, have been described as irresponsible given the country's underinvestment in critical areas such as healthcare, retirement, and national security. These tax cuts have increased deficits and driven up the country's debt, requiring higher funds to service it.
In conclusion, the 2017 Trump Tax Law has been criticized for disproportionately benefiting the wealthy, failing to deliver on economic promises, and contributing to fiscal challenges. Policymakers are encouraged to use the upcoming tax policy debates to create a more progressive, equitable, and revenue-generating tax code.
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Changes to social security
While President Trump's "One Big Beautiful Bill Act" does not eliminate taxes on Social Security, it does provide a temporary tax deduction of up to $6,000 for seniors aged 65 and older with an adjusted gross income of $75,000 or less, or $150,000 or less for couples filing jointly. This deduction is set to expire at the end of 2028. According to an analysis by the White House Council of Economic Advisers, the deduction will increase the number of beneficiaries who do not owe taxes on their Social Security benefits from 64% to 88%. However, critics argue that the bill will weaken the program's finances and accelerate its insolvency.
The bill also includes other changes related to Social Security. It eliminates income tax on some tips and overtime pay, with a cap of $25,000 in tip income and $12,500 for overtime pay for married filing jointly filers. It provides a new tax-deferred savings account for children, allowing contributions of up to $5,000 per year. Additionally, it includes an estimated $150 billion for a crackdown on immigration and new restrictions on Medicaid, which could impact Social Security recipients.
The Social Security Administration has been accused of sending misleading emails claiming that the new law eliminates federal income taxes on most retirees' benefits. However, experts clarify that the bill does not directly cut taxes on Social Security benefits but provides an enhanced deduction for taxpayers aged 65 and older, which will help reduce households' overall tax bills, including Social Security income.
The bill has been criticized for favoring higher-income seniors, while low-income taxpayers, including low-income seniors, are expected to be negatively impacted. There are concerns about the financing shortfall in Social Security's retirement trust fund, and the bill is projected to pull the date of potential benefit cuts closer, affecting millions of retirees.
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Frequently asked questions
Trump's tax law, also known as the One Big Beautiful Bill Act, is a massive tax and spending bill that was signed into law by President Donald Trump on July 4, 2025. The law makes permanent many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), including current tax rates and the standard deduction.
Trump's tax law benefits business owners, high-net-worth households, some working families, and wealthy individuals with significant estates or investment income. It provides tax breaks for qualified tip income and overtime pay, a larger child tax credit, and a bonus standard deduction for seniors. However, low-income taxpayers, particularly those without dependents or not running a business, may not see as many advantages and could be negatively impacted.
Yes, there are several criticisms of Trump's tax law. Some argue that it is skewed towards the rich and fails to deliver on its promises. It has also been criticised for increasing the deficit and national debt, and for cutting federal support for social safety net programs. Additionally, there are concerns about the elimination of the mandate for health insurance and the potential impact on premiums and taxes for lower-income individuals.
Trump's tax law is considered the biggest tax code reform in decades. It differs from previous tax policies, such as the Bush tax cuts, by focusing on maintaining broad tax relief while providing gains to certain groups. The 2017 TCJA also introduced changes such as capping the mortgage interest deduction for homeowners at $750,000.
