According to a comprehensive analysis by the Institute on Taxation and Economic Policy (ITEP), President Trump’s tax proposals would lead to a tax cut for the richest 5% of Americans (those earning $360,000 and above) and a tax increase for all other income groups.
Specifically, the richest 1% (incomes of $914,900 and above) would receive an average tax cut of about $36,300. The next richest 4% (incomes between $360,000 and $914,900) would receive an average tax cut of about $7,200. And Americans in all other income groups would see, on average, a tax increase.
For those earning less than $360,000, the middle 20% (incomes between $55,100 and $94,100) would face an average tax increase of more than $1,500. And the poorest 20% (incomes less than $28,600) would face an average tax increase of about $800.
As a percentage of income the middle 20% would face a tax increase equal to 2.1% of their income and the poorest 20% would face a tax increase equal to 4.8% of their income.
It’s quite compelling to consider that as your income decreases, the percentage of taxes you pay actually increases in Trump’s plan.
Trump’s tax plan includes several proposals that contribute to these outcomes:
- Extending the temporary provisions of the 2017 Tax Cuts and Jobs Act
- Exempting certain types of income from taxes (overtime pay, tips, and Social Security benefits)
- Reducing the corporate tax rate
- Repealing tax credits for green energy production and use
- Imposing new tariffs on imported goods
It’s worth noting that this approach contrasts with other proposed tax plans. For example, the Biden-Harris administration’s plan would have:
- Increased taxes on those earning more than $400,000 a year
- Imposed a minimum tax on the wealthiest earners
- Expanded the Child Tax Credit
While the exact impact may vary depending on individual circumstances, the available analysis suggests that under Trump’s proposed tax plan, those earning less than $360,000 per year would generally see their taxes increase, while those earning above that threshold would likely see a tax cut.