Trump Tax Law Erases Economic, Racial Progress in the Tax Code

President Donald Trump’s massive tax-and-spending package does more to transfer wealth upward than any other single piece of legislation in decades while penalizing lower-income Americans and cutting public benefits. These policies will leave a costly hole in the federal budget for future multiracial generations.

This is the case for several reasons.

The new law continues the administration’s assault on racial and economic justice, reversing the progress in recent years by extending and expanding the 2017 Tax Cuts and Jobs Act and enacting new tax cuts on top of that. Overall, it will raise taxes on the poorest 40% of Americans and barely cut them for the middle 20%.

The richest 1%, however, will benefit more than the bottom 80% of Americans in 2026. The very wealthy are disproportionately White, while people of color are more likely to be low-income.

One of the new features of the 2017 Trump tax law was the creation of the pass-through business deduction. This year, policymakers decided to increase the deduction from 20% to 23%.

The top 1%, which is predominantly White, almost exclusively will reap this benefit by getting $1 trillion in tax cuts over the next decade. Hispanic and Black taxpayers make up 15% and 11% of the US population but receive only 5% and 2% of the benefits from this special break for pass-through income, respectively, according to the Treasury Department.

Meanwhile, White taxpayers make up 67% of the population but receive 90% of the benefits. The new law’s changes to the pass-through deduction will only exacerbate that discrepancy.

The new law also increased the exemption amount for the estate tax, meaning fewer ultra-wealthy families will have to pay. The exemption, which is now tied to inflation, is $15 million for single filers and $30 million for joint filers.

This is another provision that almost entirely benefits the top 1% of taxpayers, and it’s no wonder why—it’s literally eroding a commonsense tax on extreme wealth accumulation. There are, not surprisingly, large racial disparities between inheritances.

Most families, White or Black, haven’t received an inheritance. But White families are about three times as likely to get an inheritance than Black families and receive, at the median, about 25% more ($100,830 versus $74,460).

Many of the provisions that supposedly help working families will harm many working poor families while not doing a whole lot for middle-income families. For example, the new law increases the child tax credit to $2,200 per child from $2,000 and ties it to inflation moving forward, but it leaves the credit far behind its 2021 value and keeps the credit only partially refundable.

This means millions of very low-income households still won’t be eligible for benefits. Because of historic injustices, many of these families are of color.

All the provisions in this law will have a ripple effect on younger, more diverse generations who have to carry the country forward and find a way to make health care more affordable, roads safer, and schools well funded.

This law will cost trillions of dollars, increasing the deficit and harming our economic future. These long-term consequences fall on millennials and Gen Z, who are the most diverse generations this country has ever seen.

The new law harms the economic wellbeing of poor and working families of all races, especially people of color. According to the Census, nearly one in five Black and American Indian people in the US (both including those of Hispanic origin) lived below the poverty line in 2024.

Partially paying for tax cuts for the wealthy with cuts to health care, food assistance, and other vital public services reveals clear winners and losers from this new law. This is also stagnates the economy as a whole—closing the racial wealth gap would give the US trillions of dollars more in revenue to spend on important services such as food service and health care.

Lawmakers instead could have extended most of the 2017 tax law in a far more affordable and fairer way. For example, they could have extended expiring 2017 provisions for those making less than $400,000, extended an expansion of the health insurance tax credits under the Affordable Care Act, and restored the 2021 expanded version of the child tax credit.

This would have delivered larger tax cuts in 2026 to the bottom 60% of Americans, and it would have been significantly less expensive. We estimate it would have cost $264 billion in 2026—less than half as much as the new law. This approach also would have helped people of all races and would have preserved much more revenue to invest in services that reduce racial and economic gaps.

As we confront this new fiscal reality, we must remember what made this country strong: a shared faith in the fairness of society. The new tax and spending law doesn’t meet that ethos; it falls tremendously short.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Brakeyshia Samms is a senior analyst at the Institute on Taxation and Economic Policy.

Write for Us: Author Guidelines