As Representative Jason Smith commenced a marathon session this week to consider a sprawling and expensive Republican tax package, he took special care to emphasize his party’s commitment to “hard-working Americans.”
“Pro-growth tax policy will shift our economy toward one that serves them, not the wealthy and well-connected,” Mr. Smith, the Missouri lawmaker who leads the House’s top tax panel, proclaimed.
But the proposal he is trying to get to President Trump’s desk ultimately tells a more complicated story. The Republican tax plan may offer only modest gains to everyday workers, according to a wide range of tax experts, and some taxpayers may actually be left in worse financial shape if the bill becomes law.
The latest assessment arrived Friday from the Penn Wharton Budget Model, a nonpartisan scorekeeper closely watched on Capitol Hill. Economists found that many Americans who make less than $51,000 a year would see their after-tax income fall as a result of the Republican proposal beginning in 2026.
The Penn Wharton estimate sought to analyze the full scope of the Republican tax package, computing the effects of the tax cuts as well as the plan to pay for them by slashing federal spending on other programs, including Medicaid and food stamps. Combined, those policies could fall disproportionately on the poorest, including those near or below the poverty line, the economists found.
People making between about $51,000 and $17,000 could lose about $700 on average in after-tax income beginning in 2026, according to the analysis, when factoring in both wages and federal aid. That reduction would worsen over the next eight years. People reporting less than $17,000 in income would see a reduction closer to $1,000, on average, also increasing over time, a shortfall that underscores their reliance on federal benefits.
By contrast, the top 0.1 percent, including those with incomes over $4.3 million, would gain on average more than $389,000 in after-tax income in 2026, the data show. These earners benefit more from a Republican measure because it cuts taxes on the wealthy and makes other favorable changes, including for businesses, which may improve the value of their investments.
Penn Wharton did not factor economic growth into its projections. In recent days, Republicans have vigorously rejected any assertion that their bill is better for the richest Americans, arguing that it would generate substantial economic growth and deliver new jobs and rising wages in the process.
The legislation would extend a set of tax cuts on individuals and businesses that Mr. Trump and his Republican allies passed in 2017. That extension would stave off the “largest tax hike in American history,” Mr. Smith, the chairman of the House Ways and Means Committee, said at a hearing Tuesday. His office declined to comment.
The discrepancy highlights both the complexity of the U.S. tax code and the sheer scope of the changes that House Republicans seek. Much of their tax agenda remains a work in progress, as party leaders continue to grapple with simmering divisions inside their own ranks and growing demands for changes from their counterparts in the Senate.
At the core of the effort, Republicans are racing to preserve the policies they enacted for Mr. Trump in the Tax Cuts and Jobs Act in 2017. The sprawling law changed the way taxpayers calculate their annual bills while lowering the corporate rate to 21 percent and the tax rate on the highest-earning individuals to 37 percent.
Republicans consider the law a resounding success. In a report issued in April, the White House estimated that the 2017 tax cuts increased the nation’s total economic output, which was 2.5 percent higher at the end of 2019 compared with the period before the law was enacted, while growing real wages by nearly $5,000.
“It helped set us up for a better economic situation going into the pandemic,” said Matthew D. Dickerson, the director of budget policy at the conservative-leaning Economic Policy Innovation Center.
But economists long have warred over the law’s impact, including its effects on the federal debt and its consequences for workers. Reviewing its economic and fiscal effects last year, the Urban-Brookings Tax Policy Center, a nonpartisan think tank, found that an extension would again cut taxes for most Americans, but nearly half of its benefits would flow to those who make $450,000 a year or more.
“Delivering tax relief that way, it’s sort of unavoidable to not have most of the benefits go to higher-income people,” said Joseph Rosenberg, a senior fellow at the Urban Institute.
In reprising that approach, Mr. Trump and his Republican allies unveiled a bevy of additions they have described as a boon for everyday workers. For individual taxpayers, they proposed to raise the standard deduction by $1,000, while aiming to lift it by $4,000 for seniors, in a move meant to replace the president’s promise to eliminate taxes on Social Security.
House Republican lawmakers also proposed adding $500 to the child tax credit, which families can receive through their tax filings annually, and they looked to end federal taxes on tips and overtime pay, as requested by Mr. Trump.
Kevin Hassett, the director of the White House National Economic Council, said in an interview this week on CNBC that the president had instructed Congress to “go after the things that are going to help middle-class folks.”
The sum of those proposals could help reduce many workers’ tax bills, according to early analyses. One report this week from the Tax Foundation, a research center that generally favors lower taxes, found that the legislation would increase market incomes — a measure of income that includes wages and other elements — by 4.4 percent on average in 2026.
But Erica York, the vice president of federal tax policy at the organization, said the benefits would not be parceled out equally, resulting in the “larger increases in after-tax income for the top 5 percent of taxpayers.”
Asked about the early findings, Harrison Fields, a White House spokesman, said in a statement that the president’s “‘one big, beautiful bill’ will continue to prove the haters wrong.”
Mr. Fields also pointed to the findings of the Joint Committee on Taxation, a nonpartisan budget keeper on Capitol Hill. Its report, issued Tuesday, showed most Americans would see a tax cut under the House measure, though some lower-income taxpayers could see increases. That may be because some of Republicans’ proposed tax cuts targeting workers are temporary and would expire within the next 10 years.
But the tax scorekeepers only captured some of the effects of Republicans’ agenda. In the House, party leaders have moved to offset their proposal with an expansive set of cuts to a wide variety of federal agencies, programs and tax credits, some of which serve those with lower incomes.
House Republicans chose, for example, to tighten eligibility for tax credits that help millions of Americans purchase health insurance. Party leaders also proposed deep reductions in Medicaid, which offers coverage to the poor, and food stamps.
Under each of those changes, millions of Americans stand to lose access to federal safety net benefits, according to the government’s own estimates in recent months. Those losses threaten to overshadow any gains among some of those families from the president’s campaign to slash taxes, some data show.
“It is dishonest to pretend the tax analysis is a full representation of the bill,” said Brendan Duke, the senior director for federal fiscal policy at the Center on Budget and Policy Priorities, a left-leaning group.
In his own number crunching, Mr. Duke found that the after-tax income of people making over $1 million would rise by 4.3 percent in 2027, translating to an average gain of more than $89,000. His analysis incorporated a Republican plan to relax the estate tax, which benefits higher earners.
But Mr. Duke found that the bottom fifth of all American earners would see only a 0.6 improvement in their after-tax income, which on average equals about $90. His analysis did not include the effects of spending cuts in programs like Medicaid.
The savings nonetheless help to offset a package that introduces a series of permanent tax changes that carry great benefits for the wealthy.
House Republicans have proposed a higher threshold for triggering the estate tax, which eases the financial burden on wealthier Americans who pass down large inheritances, along with a 23 percent deduction for so-called pass-through income, which reduces taxes on business income taxed at the individual rates of an owner.
At one point, Mr. Trump did call for raising taxes on the wealthy, particularly by creating a new tax bracket for people making more than $2.5 million a year. But the president later backed away from that push as he faced an onslaught of criticism from members of his own party. Even Mr. Trump later admitted the idea would be “very disruptive.”
“The Bill is GREAT,” the president posted on Truth Social this week, as House Republicans began to advance key portions of his tax agenda, adding: “The Golden Age of America will soon be upon us.”
Andrew Duehren contributed to this report.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
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