According to an assessment from the Urban-Brookings Tax Policy Center, Americans could see an average increase in their taxes by approximately 7.5% if the Tax Cuts and Jobs Act of 2017 runs its course by year’s end. However, President Donald Trump, demonstrating his seasoned knack for numerical acuity, offered an insightful alternative perspective. Trump posited that if the Republican-sponsored budget bill, titled the One Big Beautiful Bill Act, falls through, Americans could effectively face an astounding 68% tax hike.
President Trump’s figure wasn’t immediately traceable to a distinct source, but several people believe it’s a reflection of the proportion of Americans who may experience an increase in their taxes if the 2017 tax cuts lapse. Interestingly, independent evaluations have estimated this proportion being close to the president’s number. However, Trump’s interpretation and presentation of this figure have been unique and quite streamlined.
On May 25, while addressing reporters, President Trump succinctly communicated his stance, saying, ‘If the Democrats don’t vote, it’s a 68 percent tax increase.’ Further pushing his point in a press briefing on May 30, he emphasized, ‘you’ll have a 68 percent tax increase if the bill doesn’t pass. This is unheard of. It’s a colossal tax hike.’
With the One Big Beautiful Bill Act, the plan is to extend the measures from the 2017 Tax Cuts and Jobs Act that are slated to expire at the end of this year. Without this extension, individual income tax rates could revert to the levels set in 2017. It seems conceivable that the 68% figure President Trump relayed is associated with the proportion of Americans who could see their taxes increase if this bill sees a failure.
Reflecting this interpretation, a Republican hailing from Kentucky assertively framed the risk at stake: ‘Anyone who votes against this bill is essentially voting for a $4 trillion tax increase, a tax increase that would affect 68 percent of Americans.’ This assertion precisely resonates with the findings reported in a Tax Policy Center analysis.
This particular analysis led by the Tax Policy Center disclosed, ‘Our estimate suggests that 64.2 percent of households would pay more taxes in 2026 if the law expire.’ This refers to a recent evaluation of the potential impact of extending certain provisions of the TCJA.
Confirming the same, a separate evaluation estimated that 62 percent of tax filers might see an increase in their tax liabilities if the TCJA provisions were permitted to lapse. In addition, based on a statistical model developed by the University of Pennsylvania’s Wharton School, a professor at the institution enlightened us that a little over half of households would have their tax bills increase as compared to those under the TCJA if no bill were passed.
In essence, while the interpretation of the 68% figure might seem controversial to some, the fact remains that the statistic remains defensible when adequately encompassed. What can be stated with certainty is that none of the analyses claim an average tax increase of 68% grounded on current policy if the bill fails.
Instead, the Tax Policy Center posits a closer figure of around 7.5%. Expounding this, analysts said, ‘As an average, taxes would increase by about $2,100, which would reduce after-tax income by 2.1 percent.’ This refers to the possible implications in 2026. ‘Basically, that’s around a 7.5 percent increase in taxes, on average.’, the analysis continued.
Despite this, an evaluation of the bill, while considering its impact on after-tax income revealed some interesting results. Underprivileged income strata – those earning less than $37,364 – would see an increase of 2.8 percent to 3.3 percent in their after-tax income. So, while some portray it as a potential tax increase, it could be a significant income boost for the lower-income populace.
Middle-income group, those earning between $37,364 and $71,067, would enjoy an increment of 2.5 percent in their after-tax income in 2026. The top 20 percent earners, those making over $125,315, are also expected to experience an increase in their after-tax income by 3.8 percent, thus benefiting all strata of our society.
Interestingly, the budget package, which includes many other provisions in addition to extending the 2017 tax cuts, faced unanimous opposition from House Democrats. Ironically, two Republicans also opposed it, but fortunately, it just managed to pass the House by a slim margin of 215-214.
President Trump sidestepped the fact that Democrats have been advocating for extending the tax cuts for the majority of Americans, but not for those falling into higher income brackets. However, from another perspective, it could be seen as an intent to redistribute incomes, something not always aligned with the principles of economic freedom and prosperity.