The recently released Trump megabill, for instance, has all sorts of promises of shovel-cut tax favors. These cuts will disproportionately benefit America’s wealthiest households. The plan will begin to be implemented in 2026. In fact, it boasts an average tax cut of over $66,000—equal to about 2.4% of the top 1% of U.S. households’ income—going to the top 1%. Over the next ten years, the megabill is poised to provide more than $4 trillion in net tax cuts. Almost all of these benefits will accrue to those making top earners.
The bottom 90% of U.S. households earn $36,000 or less per year. Each of them, on average, return roughly $2.7 million in income. Under the lapsed but emerging-as-the-default-Trump-megabill, these households would see big decreases in their expected federal tax liabilities. Meanwhile, the wealthiest 20% of U.S. households make more than $217,000 annually. In 2026, that means them getting a tax break equal to 3.4% of their after-tax income.
The budgetary effect of the Trump megabill will be radically different depending on which state a high-income taxpayer lives in. Residents of states such as Wyoming, South Dakota, and Texas reap the rewards of no state income tax. Consequently, the richest 1% would get large annual tax cuts. In Wyoming, households should soon expect a tax cut. For the average worker, that would be a savings of roughly $133,000 – only 3% of their income.
Carl Davis, research director at the Institute on Taxation and Economic Policy (ITEP), noted the geographic implications of the bill.
“The bill is most advantageous to conservative-leaning states that have a lot of very wealthy people living within their borders.” – Carl Davis, ITEP’s research director.
He further emphasized that such states are “classic examples of states with a lot of wealthy people and which tax those wealthy people incredibly lightly.”
Wealthier residents in states like California and New Jersey would see more modest tax cuts under the new proposal. For California, this means giving the highest earners an average cut of around $34,000 in 2026. Likewise, residents of New Jersey can anticipate an average savings of about $21,000.
Though the Trump megabill showers benefits on already wealthy households it offers next to nothing to lower-income earners. The bottom quintile of U.S. households would get a paltry 0.8% tax cut. The bill’s stated purpose is to slash billions of dollars from social safety net programs. It hits Medicaid and food assistance programs that support people with more modest means.
This megabill’s centerpiece is extending the tax cuts that President Trump enacted during his first term in 2017. It’s a big step Bill to help direct the economy. The proposal would place a ceiling on deducting state and local income taxes and property taxes. Second, it caps these deductions to no more than $40,000 per year.
So as this discussion about the Trump megabill continues, it raises some important equity and fiscal responsibility questions in the process. For this reason, critics have expressed concern that income inequality will widen. They worry that this would put vital social safety net programs that serve our most vulnerable neighbors in jeopardy.