The taxation word game: Because the bottom 20% of earners pay negative income tax, it can always be claimed that any across-the-board income tax reduction benefits the rich more than the poor. Of course, the average working person, who represents the vast majority of the population, would be best served by having their own taxes reduced by 5% or 10%, regardless of whether wealthy individuals see a larger dollar savings from the same percentage cut.
Additionally, tax reduction bills often include cuts to free money and other government transfers given to the bottom 20%. So, any tax cut proposal from Republicans can be attacked by Democrats as allegedly hurting “the little guy.”
In fact, they’re not exactly lying when they say “a billionaire saved millions, while a poor person had their benefits cut.” But the argument is misleading, because the majority of Americans will end up saving thousands, which most people appreciate.
It appears that most of the proposed spending cuts in President Trump’s “Big Beautiful Bill” would primarily affect the non-working or underemployed bottom 20% of earners, rather than working- or middle-class Americans. For example, the bill imposes Medicaid work requirements on childless adults aged 19 to 64, a change expected to save tax money by reducing enrollment by up to 10 million people by 2034, according to congressional estimates.
Similarly, reforms to SNAP would shift some costs to states and tighten eligibility, mainly impacting those without stable employment. By contrast, working families stand to benefit from new tax relief provisions, such as the elimination of taxes on tips, car loan interest, and overtime pay, all of which reduce the tax burden on hourly and service workers.
The only proposed cut that might impact middle-class families is the reform to federal student aid, specifically, the tightening of federal loan borrowing limits and restrictions on certain Pell Grant uses. However, this reform could help curb rising tuition costs. Many economists argue that the cycle of expanding government grants and loans has fueled tuition inflation.
Meanwhile, the need for federal student loans is shrinking: as of 2025, 35 U.S. states offer tuition-free community college, and a growing number of public universities now provide free tuition to students from families earning under $100,000 annually.
For example, the University of Texas System waives tuition and mandatory fees for in-state undergraduates from families earning up to $100,000. Princeton University provides full tuition for students below that same income threshold. These initiatives make college significantly more affordable for most working- and middle-class families without needing to rely on excessive federal borrowing.
The bottom 20% of income earners pay negative income tax, receiving more in benefits than they pay in. Through programs like refundable tax credits, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), the average federal tax rate for the lowest quintile is -11%. Significantly raising their taxes wouldn’t even bring their net tax contribution to zero.
By contrast, according to the latest IRS data, the top 5% of earners, those with incomes of $252,840 and above, paid over $1.4 trillion in income taxes in 2021, accounting for approximately 66% of total federal income tax revenue. All the liberals demanding that we “tax billionaires” or insisting that billionaires should “pay their fair share” are a bit late, because billionaires are already supporting the bulk of government spending.
Given this distribution, the notion that the Trump administration is stealing from the poor to make the rich richer is illogical.
Democrats keep claiming that the new tax plan is a “tax hike on the poor,” but it does not increase tax rates for low-income Americans. Rather, it disqualifies some individuals from certain benefits and requires a larger percentage of them to return to work. Ultimately, this will result in greater tax savings for working people.
This also fits well with the deportation of illegal aliens, which will begin freeing up jobs at the lower end of the labor market. An added bonus is that, as illegal workers are removed from the labor pool, wages for those jobs will rise, possibly enough to make them appealing even to people who were previously collecting government benefits.
Another aspect of Trump’s tax plan and business policy that Democrats frame as “welfare for billionaires” is the reduction of taxes and regulations on businesses. The idea is to lower costs for businesses to encourage expansion and job creation. Right now, with tariffs in place, companies are already incentivized to relocate to the U.S. Reducing regulations and taxes would provide an additional incentive to accelerate that shift.
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