As President-elect Donald Trump prepares to expand his signature tax policies, one big question arises: Who wins with these cuts? Spoiler alert: it’s not your average Joe. If you’re bringing in $450,000 or more per year, congratulations, you’ve officially entered the winner’s circle of potential tax breaks.
But let’s break it down: who benefits the most, who barely feels it, and what does it all mean for American profits?
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Big money, bigger breaks
You are lucky if your annual income is € 450,000 or higher. This puts you squarely in the top 5% of earners in the US and you are poised to receive the lion’s share of the benefits from the extension of the Tax Cuts and Jobs Act (TCJA) of 2017. High income earners in this category should could see income after taxes increase by approximately 3.2%.
Things get even rosier for the ultra-rich. If you’re in the top 1% (earning $1 million or more), you’re looking at an average tax cut of $70,000 by 2027. And for the elite 0.1% — those who rake in $5 million or more — the benefits skyrocket to an average cut of nearly $280,000, or about 3% of after-tax income.
In short: the higher your income, the better your tax benefit.
See also: Many use this retirement income calculator to check if they’re on track – here’s an overview of what’s behind this formula.
The middle class gets crumbs
Now let’s talk about middle-income households that earn between $65,000 and $116,000 annually. On average, this group could see a modest tax cut of about $1,000, which equates to a 1.3% increase in after-tax income, according to the Tax Policy Center. While any tax relief is welcome, it is clear that these breaks will not have the same impact on the middle class as they do on high income earners.
But not everyone in this category will benefit from this. The TPC reports that about 13% of middle-income households could see their taxes increase if these benefits are expanded. The inequality here underscores one of the main criticisms of Trump’s tax policy: It disproportionately benefits the wealthy, leaving middle-income families feeling like an afterthought.
What’s the catch?
Expanding the TCJA isn’t cheap; it is expected to cost the US government about $5 trillion over the next ten years. Supporters argue that lower taxes will boost economic growth, but critics warn the plan could worsen income inequality and increase the federal deficit.
