With President-elect Donald Trump gearing up to extend his signature tax policies, one big question looms: who wins with these cuts? Spoiler alert – it’s not your average Joe. If you’re pulling in $450,000 or more a 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 a thing and what does this all mean for America’s bottom line?
Don’t Miss:
Big Money, Bigger Breaks
You’re in luck if your annual income sits at $450,000 or higher. This puts you squarely in the top 5% of earners in the U.S. and you’re primed to receive the lion’s share of the benefits from extending the 2017 Tax Cuts and Jobs Act (TCJA). High earners in this range could see their after-tax income increase by about 3.2%.
Things get even rosier for the ultrarich. If you’re among 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 raking 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 sweeter your tax break.
See Also: Many are using this retirement income calculator to check if they’re on pace — here’s a breakdown on how on what’s behind this formula.
The Middle Class Gets Crumbs
Now, let’s talk about middle-income households earning between $65,000 and $116,000 annually. On average, this group might see a modest tax cut of around $1,000, representing a 1.3% bump in after-tax income, according to the Tax Policy Center. While any tax relief is welcome, it’s clear these breaks don’t pack the same punch for the middle class as they do for high earners.
But not everyone in this bracket will benefit. The TPC reports around 13% of middle-income households could see their taxes go up if these provisions are extended. The disparity here underscores one of the main criticisms of Trump’s tax policies: they disproportionately favor the wealthy, leaving middle-income families feeling like an afterthought.
What’s the Catch?
Extending the TCJA isn’t cheap – it’s projected to cost the U.S. government about $5 trillion over the next decade. Proponents argue that lower taxes spur economic growth, but critics warn that the plan could worsen income inequality and balloon the federal deficit.
