The combination of new tariffs announced by the Trump administration in 2025 and new policies implemented in the One Big Beautiful Bill Act (OBBBA) will cause Americans’ incomes after taxes and transfers to decrease across the board in 2027, relative to 2025. Indeed, only the top 1 percent of U.S. households by earnings will see an increase. Despite some lawmakers’ attempts to rebrand the bill as a “working families tax cut,” middle-income households will experience a net income decrease of 1.2 percent, or $1,300, in 2027. Meanwhile, the top 1 percent will receive a net income increase of nearly $5,000.
The recently enacted OBBBA will increase deficits by $3.4 trillion over the next decade, while newly increased tariffs will raise revenues by roughly $2.9 trillion over the same period—if kept in place unchanged. However, much of the cost of the OBBBA comes from simply continuing previous, unpaid-for tax policies. The renewal of sunsetting provisions from the 2017 Tax Cuts and Jobs Act (TCJA) does not provide additional tax cuts beyond what a household was experiencing in January 2025, so this analysis discounts that portion of the bill, as it is more concerned with how policies will change Americans’ budgets going forward. Extending the TCJA tax provisions was counted as part of the Congressional Budget Office’s official cost estimate of the bill because these provisions had not been paid for or previously authorized in law.
FIGURE 1*
Trump administration policies affect American households’ resources differently at different income levels. Americans at all income levels—except for the top 1 percent—will have lower after-tax-and-transfer income in 2027 because of the administration’s signature economic policies. By 2029, Americans at all income levels will have lighter pocketbooks, on average, than they would under a scenario in which the Trump administration’s policies were never implemented. In 2027, the poorest 20 percent of American households will be $160 worse off because of the new policies in the OBBBA and will lose $1,490 in income to tariffs, for a net decrease of $1,650, or 3.4 percent of their income. (see Figure 1)
At the same time, the middle 20 percent of American households, who have an average income of $109,000, will see that income decrease by $1,300 after they receive a tax cut (net of spending cuts) of $950 but the Trump administration’s massive tariffs increase their costs by $2,250. In contrast, new provisions in the OBBBA give the top 1 percent a $17,800 benefit, which exceeds their average $12,800 tariffs costs by $5,000.
The middle 20 percent of American households, who have an average income of $109,000, will see that income decrease by $1,300.
Many of the new OBBBA tax policies are set to expire after 2028, even as cuts to Medicaid and other social assistance programs grow. In 2029, the average income of the poorest fifth of Americans will be 5 percent, or $2,500, lower because of these Trump administration policies. The tariffs and the OBBBA will also lower middle-class Americans’ average income by $2,000, or 1.8 percent, in 2029. Even the top 1 percent will have a slightly lower average income in 2029 after accounting for tariffs.
Conclusion
Americans’ pocketbooks will take a hit because of new Trump administration policies. These policy changes come at a time when economic policy turbulence is costing the economy, job growth is slowing, and inflation remains above target. This analysis indicates that Americans will not find relief from these trends from the administration’s principal fiscal policies.
The author would like to thank Bobby Kogan for his valuable contributions to this column, as well as Kennedy Andara for her fact-checking assistance.
Methodology
This analysis examines the resources change at various income quartiles in 2027 and 2029, compared with the pre-Trump administration status quo, using the official distribution analysis of the OBBBA from the Congressional Budget Office (CBO) plus reports from the Joint Committee on Taxation to separate the purely new policies in the OBBBA from provisions that continued previous TCJA policy. Purely new policies in the OBBBA include cuts to Medicaid, cuts to the Supplemental Nutrition Assistance Program (SNAP), permanent business tax cuts, and temporary tax cuts on tips, overtime, auto loan interest, and more. The Medicaid and SNAP cuts phase in over time, while some tax cuts are temporary thus, the author presents an analysis before and after the temporary tax cuts expire.
The CBO estimate of $3.3 trillion in higher tariff revenues covers the years 2025–2035, whereas CBO’s OBBBA cost estimate covers the years 2025–2034. To make the budgetary impacts comparable, the author estimated the revenue impact from tariffs for 2025–2034 based on figures from the CBO and from the Budget Lab at Yale. Data points on tariff costs also come from the Budget Lab at Yale, which provides estimates of the impact of Trump’s tariffs at different income levels.
This analysis uses the CBO’s concept of income. This is income after federal taxes and after receiving social insurance benefits and means-tested transfers. Tariffs are included as federal taxes in this analysis.
Due to data limitations, this analysis does not include some other upcoming policy changes, such as the expiration of enhanced premium tax credits for Affordable Care Act health insurance marketplace plans at the end of 2025, which will make the middle 60 percent of Americans’ average incomes more negative, by a few hundred more dollars, than shown in this analysis.
Corey Husak is Director, Tax Policy
