The Urban-Brookings Tax Policy Center (TPC) has conducted an analysis that reveals households making over $450,000 would receive more than 45 percent of the benefits of extending key provisions of the 2017 Tax Cuts and Jobs Act (TCJA). If these provisions are made permanent, it would cut taxes for the highest income 1 percent of households by 3.2 percent, with the top 0.1 percent receiving an average tax cut of nearly $280,000 in 2027. Middle-income households, on the other hand, would see their taxes decline by about $1,000 or 1.3 percent of their after-tax incomes.
President Biden and former president Donald Trump have differing views on extending the TCJA provisions, with Biden aiming to avoid raising taxes for those making $400,000 or less. Trump, on the other hand, sees extending the TCJA as crucial to his economic agenda. Extending the law would increase the national debt by over $4 trillion over the next decade. About three-quarters of households would benefit from the extension, but about 10 percent would see their taxes rise, with 45 percent of the benefits going to those making approximately $450,000 or more in 2027.
Extending the TCJA would create winners and losers within income groups. While about 86 percent of middle-income households would get a tax cut, around 13 percent would see their taxes rise. Among the top 1 percent, taxes would decline for roughly 81 percent but rise for the remaining 19 percent who would receive a large share of the benefits. Biden’s promise to only raise taxes on households making over $400,000 could result in taxes being cut or remaining the same for about 95 percent of households, depending on income measurement.
Different income groups would be impacted differently by the extension of the TCJA provisions. Low-income households would benefit most from the higher standard deduction and more generous Child Tax Credit, while middle-income households would benefit from a variety of changes including the higher standard deduction, CTC, and lower income tax rates. Higher-income households, particularly the top 0.1 percent, would benefit from low income tax rates and several business tax changes, with a downside being the limits on itemized deductions.
TPC’s estimate suggests that extending the TCJA would lower taxes by an average of about $2,000 in 2026, with nearly half of the benefit going to the highest-income 5 percent of households. The biggest winners from extending the law would be those with incomes over $450,000, as they would receive a significant portion of the tax cuts. The contrast between Trump and Biden’s approaches to the TCJA extension highlights a critical point of disagreement in their economic agendas, with Biden aiming to avoid raising taxes for lower-income households while focusing on increasing taxes for high-income households and businesses.
