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UNPACKING THE HOUSE’S HIGHLY REGRESSIVE TAX PLAN  
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Carl Davis
May 15, 2025
Common Dreams
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_ Two-thirds of the tax cuts offered in 2027 would go to the top 20%
of families, and 41% would flow to just the top 5% of families. _

People take part in a protest against the Republican tax bill in Los
Angeles, California on December 4, 2017., Ronen Tivony/NurPhoto via
Getty Images

 

The U.S. House of Representatives unveiled a sprawling piece of tax
legislation earlier this week that would extend temporary tax changes
enacted in 2017 and layer various kinds of tax cuts and increases on
top. The Institute on Taxation and Economic Policy is currently
working to analyze the bill with its microsimulation tax model and
expects to report substantial new findings in the days ahead. In the
meantime, there are insights to be gained from the wealth of
information on revenue cost
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published by Congress’ Joint Committee on Taxation.

The Joint Committee on Taxation (JCT) analysis makes clear that the
House tax plan would be regressive, meaning it would offer larger tax
cuts as a share of income to high-income taxpayers than to either
middle-class or working-class families. It also makes clear that most
of the tax cuts would go to families with above-average incomes.
Specifically, Figure 1 shows JCT’s finding that two-thirds of the
tax cuts offered in 2027 would go to the top 20% of families, and 41%
would flow to just the top 5% of families. Given that a large majority
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of Americans agree that high-income people pay too little in tax,
paring back or eliminating the tax cuts flowing to the top offers a
logical starting point for beginning to bring down the high cost of
the bill.

FIGURE 1

Differences in the average tax cut provided to each group would be
dramatic, with the cuts rising significantly alongside income, as seen
in Figure 2. While working-class families (defined here loosely as the
bottom 40% of earners) could expect an average tax cut of $361 in
2027, the nation’s highest-income families (defined as the top 0.1%)
would receive an average tax cut of at least $255,670 in that year. In
reality, the average tax cut for affluent families is likely to be
somewhat larger than this, as the JCT’s distributional figures do
not include the bill’s estate tax cuts benefiting people with
multimillion-dollar estates.

These figures also do not include other potential costs to families
likely to be included in the bill, such as deep cuts to Medicaid and
food assistance. The Congressional Budget Office recently predicted
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that the bill would put the nation on a path toward a future where
13.7 million fewer people would have health coverage. Of that amount,
8.6 million would lose coverage as a direct result of provisions
contained in the bill, especially those slashing Medicaid. Another 5.1
million would lose coverage because of the expiration of temporary
enhancements to the Affordable Care Act premium tax credits which,
contrary to what we have seen in past Congresses, this current
Congress appears to have no interest in making room for in its
legislation.

FIGURE 2

The JCT has also published extremely detailed estimates of the revenue
impact of most provisions in the bill. Exploring those estimates
yields additional insights into the bill’s most significant changes.

The JCT estimates are reported in a way that mirrors the sorting of
the bill itself, which is understandable given the JCT’s role in
this debate. Unfortunately, however, the bill’s organizational
structure is far from intuitive, and that makes it difficult for
observers to understand the overall effects of this legislation.

One of the more remarkable takeaways from the JCT’s revenue
estimates is just how insignificant the tax provisions discussed most
during the last presidential campaign—especially tax breaks for
tips, overtime, car loan interest, and senior citizens—are in the
broader context of this very large bill.

The section of the bill titled “Make Rural America and Main Street
Grow Again,” for example, includes everything from cutting taxes on
multinational corporations’ offshore profits to repealing an excise
tax on indoor tanning services. Similarly, the section titled “Make
America Win Again” includes provisions as varied as scrapping tax
credits that help homeowners purchase more energy efficient furnaces,
significantly raising taxes on nonprofit foundations and colleges, and
eliminating taxes on firearm silencers.

By sorting the JCT’s revenue estimates into more intuitive
categories, we can gain a better understanding of how the bill would
reshape our tax code. As seen in Figure 3, the bill includes $7.7
trillion in gross tax cuts over the next decade, before considering
various offsetting tax increases discussed below. It bears noting that
this $7.7 trillion tax cut would be significantly higher if the many
temporary provisions in the bill were to be extended, as many
lawmakers certainly hope.

Figure 3.

The largest single item in the JCT’s revenue estimates is a
reduction in tax rates, which disproportionately benefits high-income
earners and plays an important role in the overall regressive tilt of
the bill. Other significant regressive tax cuts include a watering
down of the Alternative Minimum Tax (AMT), which was designed to
ensure that high-income earners pay some minimum amount of tax, as
well as a variety of business tax cuts and a substantial estate tax
cut on the transfer of extraordinary amounts of wealth from one
generation to the next.

Other notable tax cuts include an increased standard deduction and
Child Tax Credit (CTC), though it is important to recognize that these
cuts are largely offset by certain tax increases affecting broadly
similar policies. As seen below in Figure 4, the single largest
revenue-raiser in the bill is repeal of personal and dependent
exemptions that, prior to 2018, served a purpose very similar to the
higher CTC and standard deduction amounts available today. This fact
is important to understanding why the bulk of the more progressive tax
cuts in the bill are illusory, and why the overall bill tilts
regressive despite the presence of these isolated progressive
features. According to the JCT score, almost 90% of the tax cuts
associated with increasing the standard deduction and the Child Tax
Credit are offset by tax increases associated with repealing personal
and dependent exemptions.

In total, the bill contains $3.9 trillion in gross tax increases over
the next 10 years, which are sorted into broad categories in Figure 4.
When combined with the $7.7 trillion in gross tax cuts shown above,
the net tax cut amounts to $3.8 trillion over the coming decade.

FIGURE 4

Aside from repealing personal exemptions, the most important
revenue-raisers in the bill are the repeal or reduction of a variety
of tax provisions meant to help accelerate the nation’s transition
to a green energy economy, the paring back of premium tax credits
meant to help families afford health insurance, and the extension of
caps on the amount of state and local tax (SALT) that
taxpayers—especially those living in blue states with more robust
income and property taxes—can write off on their federal tax forms.
In fairness, some of the tax increase associated with SALT shown in
Figure 4 can be thought of as an offset to the AMT cuts shown in
Figure 3, as the AMT functioned partly as a limitation on SALT
deductions.

One of the more remarkable takeaways from the JCT’s revenue
estimates is just how insignificant the tax provisions discussed most
during the last presidential campaign—especially tax breaks for
tips, overtime, car loan interest, and senior citizens—are in the
broader context of this very large bill. These core features of the
Trump campaign’s platform, which continue to dominate much of the
debate over taxes today, come at a total cost of $293 billion. While
that amount is not trivial, it equals just 3.8% of the $7.7 trillion
gross tax cut being offered under this bill. The tax cuts being
offered to businesses, by contrast, are more than four times larger.

The low price tag attached to the highest-profile tax changes is
partly due to their limited reach (most Americans do not receive tips
or overtime pay, for instance), and partly due to the fact that the
bill’s authors have chosen to place four year sunsets on each of
these provisions. The temporary nature of these policies ostensibly
targeted toward the working class, as well as others such as temporary
enhancements to the Child Tax Credit and the standard deduction,
stands in sharp contrast to the permanent nature of some of the
bill’s less-discussed provisions such as its permanent cuts to the
estate tax and so-called GILTI taxes on multinational corporations’
offshore profits.

As seen in Figure 5, the vast majority (85%) of the tax bill
represents an extension of the temporary portions of the same tax cuts
first enacted by Republicans on a temporary basis in 2017. Of the
remainder, only a small sliver are the highest-profile items getting
an outsized share of the attention in the current tax debate.

FIGURE 5

 
Fully unpacking a bill of this size is no easy endeavor, and there is
no doubt that many new and important findings regarding its effects
will continue to trickle out in the weeks and months ahead. In the
meantime, however, the JCT’s work offers a powerful starting point.
The JCT has done a tremendous service in producing a range of very
high-quality information in a very short amount of time to help the
public understand this complex and, as it turns out, highly regressive
piece of tax legislation.
Carl Davis is the research director at ITEP, where he has worked since
2008.
 

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