WASHINGTON — Who are the winners and losers in President Donald Trump’s tax cut plan?
If Congress fails to pass Trump’s “big, beautiful bill,” most – but not all – taxpayers will face an increase in their federal taxes.
But several analyses indicate the state’s wealthier residents will be impacted the most and those with medium and modest incomes would see little or no change.
And the Congressional Budget Office (CBO) said the entire bill would boost the incomes of the wealthiest 10% of Americans while lowering the incomes of the lowest 10%.
“The benefits are much, much higher for higher-income people than for lower-income people,” said Joseph Rosenberg, senior fellow at the Urban-Brookings Tax Policy Center.
The U.S. House is expected to try to pass the tax cut package Wednesday in a megabill that would cut Medicaid, food stamps and other domestic programs and still balloon the deficit by at least $2.3 trillion, according to the CBO.
The tax cut package was perhaps Trump’s greatest legislative initiative in his first term in office. Its cuts to corporate taxes won’t expire; they are locked into law. But the cuts to individual taxpayers would expire at the end of the year unless Congress acts.
Yet the legislation faces obstacles from both conservatives who oppose the tax cut’s bloating of the federal deficit and moderate Republicans from blue states that insist there be a higher cap on the deductibility of state and local taxes.
Still, approval of the tax package would bring changes to individuals and couples when they fill out their 1040s for 2026 and so would the legislation’s defeat.
According to the latest Tax Policy Center analysis, the biggest winners in the bill would be Minnesota taxpayers whose adjusted gross income (AGI) is $220,000 or more and have had their taxes reduced by more than 3%.
The Internal Revenue Service says at least 400,000 Minnesota households reported AGI’s of $220,000 or more in 2022.
But most Minnesota taxpayers, more than 2.4 million, reported lower adjusted gross incomes that year and benefitted less from Trump’s tax cuts.
Households with moderate incomes, from $70,000 to $100,000, have been saving an average of about $1,800 since Trump’s tax cuts were first implemented in 2018.
Americans with less income would save less than that, and some not at all.
The Tax Policy Center’s analysis included new provisions Trump promised voters during his campaign for the White House, including an increase of the child tax credit to $2,500.
The tax package would also:
-Increase the standard deduction by $1,000 for individuals, $1,500 for heads of households and $2,000 for married couples.
-Offer most Americans who are 65 and older an extra deduction of $4,000 per filer, whether they take the standard deduction or itemize their returns.
-Deposit $1,000 for children born over the next four years in a “MAGA account” that is invested in the stock market.
-Offer a temporary tax deduction for people in occupations that “traditionally and customarily received tips,” such as restaurant servers.
-Allow filers to deduct interest on car loans, though those vehicles have to be made in the United States.
Trump also kept another campaign promise as the legislation would provide a new tax exemption for overtime pay.
While many would gain from these changes to the tax code, many provisions would expire or deductions and credits be reduced in 2028 or in the few years afterwards.
The tax package would also create losers.
Chief among them are the children of undocumented immigrants. Because there would be a new requirement that both parents have a valid Social Security number, millions of immigrant families would not receive a child tax credit.
The Center for Migration Studies estimates that 4.5 million children across the nation and about 37,000 in Minnesota who are citizens or legal permanent residents would lose eligibility for the child tax credit.
And immigrants authorized to live in the United States — but who are not citizens or green card holders — would be barred from receiving tax credits covering the cost of Affordable Care Act health insurance premiums.
Americans who purchase certain electric cars would also lose their $7,500 tax credit as well as credits for solar electric panels and energy efficient windows, appliances and other efforts to make homes more energy efficient.
No Democrat is expected to vote for Trump’s bill if it comes to the House floor Wednesday. They have decried it as a massive giveaway to the rich at the expense of the poorest Americans who would suffer a loss of medical care and other social services.
“My Republican colleagues will say these tax cuts are for everyone,” said Rep. Ilhan Omar, D-Minn., at a recent House Budget Committee hearing on the bill. But she said they favored the wealthy “and they are tiny scraps for everyone else, and I mean tiny.”
Rosenberg rebutted Trump’s claim that the tax package would boost the U.S. economy. But he said the legislation “would have little effect on economic growth going forward.”
Still, the bill would keep federal taxes lower for the majority of Americans.
“If Congress does nothing, taxes will increase,” Rosenberg said.
A salty issue
Taxpayers in high-income, high tax “blue” states like Minnesota were major losers in Trump’s 2017 tax plan because it capped the deductibility of state and local taxes (SALT) at $10,000 for individuals and $20,000 for married couples. The cap helped pay for the bill’s tax cuts.
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Those taxpayers may still be losers, but not as much. To placate a number of GOP lawmakers in swing districts in Democratic states, House Speaker Mike Johnson, R-La., has offered to lift the SALT cap to $40,000 for individuals with $400,000 or less in income.
But that did not satisfy a group of New York lawmakers who say they won’t vote for the bill unless the cap is raised much higher or removed entirely.
“We need a little more SALT on the table to get to yes,” said Rep. Nick LaLota, R-N.Y. after GOP lawmakers met with Trump on Tuesday over the massive budget package.
Late Tuesday, Johnson agreed to lift the SALT cap to $40,000 for individuals with $500,000 or less in income, which seemed to bring some of the rebellious members of the GOP “SALT caucus” along.
According to the IRS, in 2017, the year before the SALT cap was implemented, 459,070 Minnesota taxpayers deducted the cost of state and local income taxes. In 2022, after the cap was imposed, that number fell to 252,070.
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So even with the cap, some Minnesota taxpayers take the deduction.
A MinnPost analysis of IRS data shows that the largest proportion of taxpayers in the state that took the SALT deduction — 14.35% — lived in the suburban Twin Cities 3rd congressional district, which is represented by Democratic Rep. Kelly Morrison, while the smallest proportion — 4.82% — lived in Republican Rep. Pete Stauber’s 7th congressional district.
If and when the massive budget bill is approved by the House, it will head to the Senate, which has been asked by the White House to finish work on the legislation by July 4.
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