A new analysis found that higher earners stand to benefit most from the Senate’s tax bill in the short run, but future generations of all income brackets could be ‘worse off.’
Senate votes to move forward with tax and spending bill
President Trump’s bill passed a key procedural vote in the Senate. Lawmakers voted 51-49.
President Donald Trump’s tax bill could make future generations “worse off,” no matter their income, according to a new report from the Penn Wharton Budget Model.
Like other analyses, the nonpartisan research initiative’s latest findings suggest most Americans would see tax cuts, with high-income households – which tend to pay more taxes – seeing the largest gains. Long-term, though, the Penn Wharton Budget Lab’s July 1 report projects lifetime losses for all income brackets.
“It’s still higher-income households that are the winners, especially those who are alive today,” said Kent Smetters, faculty director of the Penn Wharton Budget Model.
The analysis also found the Senate’s version of the tax bill, which narrowly passed on July 1, would lead to higher deficits and slower economic growth compared to its counterpart from the House.
The bill heads to the House for final approval. Trump has asked for a final version on his desk and ready for signature by July 4, but acknowledged the deadline may be “very hard to do” as some House Republicans voice frustrations with changes made in the Senate.
What’s different under the Senate version of the tax bill?
The legislation, dubbed the “One, Big Beautiful Bill” by Trump, would make the 2017 tax cuts from Trump’s first term permanent, increase the child tax credit and introduce other tax cuts, including no taxes on tips or overtime wages.
To help pay for the cuts, the government would reduce spending on the Supplemental Nutrition Assistance Program, formerly known as food stamps, and make cuts to Medicaid, a program that provides health insurance to more than 71 million low-income Americans.
The version in the Senate has some key differences from the House bill, including:
- Permanent tax breaks for corporations that allow businesses to deduct the full cost of qualifying investments and research projects immediately, rather than over a number of years. In the House’s bill, these tax breaks were in effect from 2025 to 2029.
- Permanently enhancing the standard deduction, adding $750 for single filers, $1,125 for heads of households and $1,500 for married couples starting in 2025. There was a temporary adjustment in the House’s version that added $1,000 for single filers, $1,500 for heads of households and $2,000 for couples from 2025 to 2028.
- Permanently raising the child tax credit to $2,200 starting in 2026, compared to a temporary increase to $2,500 through 2028 in the House bill.
“The Senate one makes things more permanent,” Smetters told USA TODAY. “On the one hand, we don’t have to revisit the same politics in four years. On the other hand, there’s a fiscal cost associated with that. That means more debt and more burdens inherited by future generations.”
More Americans would also lose Medicaid under the Senate’s version, according to the nonpartisan Congressional Budget Office, with an estimated 11.8 million people uninsured by 2034, compared to previous estimates of 10.9 million people under the House’s proposal.
Impact on future generations
Various analyses suggest Trump’s tax bill would reward higher-earning Americans more than their lower-earning counterparts.
A June analysis of the House bill by the Congressional Budget Office, for instance, found resources for the poorest would decrease by about $1,600 per year under the legislation, largely due to cuts to Medicaid and food aid ‒ which would be more aggressive under the Senate bill. Meanwhile, the wealthiest would gain about $12,000 on average.
Another June report from the Yale Budget Lab suggests the bottom fifth of earners would lose about $560 per year while the top 20% would gain $6,000.
But all future generations, no matter their income, would experience lifetime losses, according to the Penn Wharton Budget Model. High-income households are set to lose $5,700 under the Senate’s bill, while low-income households would lose $22,000. The report points to a reduced social security net and lower wages as the main drivers.
Under the House bill, the Penn Wharton Budget Model projected lifetime losses ranging from $500 for high-income households to $15,800 for low-income households.
“The future generations, they’re going to be worse off. It doesn’t matter where on the income bracket they fall,” Smetters said. “Ultimately, someone has to pay for (the tax bill), and we’re basically passing it on to the next generation.”
Slower economic growth
While the House version showed a 0.4% gain in GDP by year 10, according to the Budget Model’s previous analysis, the Senate’s version would yield a 0.3% loss. After 30 years, GDP would drop 4.6% under the Senate bill compared to a 1.5% drop under the House version.
Higher deficits
Primary deficits are projected to increase $3.1 trillion over the next decade through the Senate’s tax bill, compared to roughly $2.7 trillion under the House bill, according to the Penn Wharton Budget Model.
Other reports have also found a higher debt load under the Senate bill. The Congressional Budget Office projects it would add $3.3 trillion to the national debt over the next decade, $800 billion more than the House’s bill. And a July report from the Yale Budget Lab says the Senate’s bill would add $3 trillion to the debt by 2034, compared to an estimated $2.4 trillion under the House bill.
How much do lower-income Americans stand to lose?
According to the most recent Penn Wharton Budget Model analysis, the lowest-earning households stand to lose after-tax-and-transfer income in both the short- and long-run, while higher earners would see gains under the Senate bill.
- Those earning less than $18,000 would lose $235 on average in 2027 and $1,380 by 2033.
- Those earning between $18,000 and $52,999 would lose $75 in 2027 and $1,625 by 2033.
- Those earning between $53,000 and $95,999 would gain $1,350 in 2027 but lose $130 by 2033.
- Those earning between $96,000 and $178,999 would gain $3,880 in 2027 and $2,825 by 2033.
- Those earning between $179,000 and $271,999 would gain $6,615 in 2027 and $4,985 by 2033.
- Those earning between $272,000 and $400,999 would gain $9,360 in 2027 and $7,670 by 2033.
- Those earning between $401,000 and $1,019,999 would gain $20,605 in 2027 and $18,645 by 2033.
- Those earning between $1,020,000 and $4,450,999 would gain $36,020 in 2027 and $29,430 by 2033.
- Those with an income above $4,451,000 would gain $290,485 in 2027 and $82,255 by 2033.
Smetters said figures may be slightly adjusted as more information on specific amendments becomes available.
