The federal tax overhaul that has passed Congress and will soon land on President Trump's desk will lower taxes for 80.4% of taxpayers in 2018, but raise them for the majority in 2027, according to the Tax Policy Center.
Most of the legislation's personal tax provisions expire after 2025 (though not the one that repeals the individual mandate or the one that changes the IRS' measure of inflation in a way that disadvantages taxpayers). This expiration date leaves 53.4% of all U.S. tax units with higher bills in 2027 than they would have under current law. In other words, the bill that Trump called "the largest tax cut in our country's history," while it does cut taxes for most people on a temporary basis, is a tax hike in the long term.
Personal tax cuts expire in order to comply with budgetary rules that allow Republicans to pass the bill with a simple majority: the Byrd rule blocks filibusters only if the deficit does not rise within a 10-year window by more than the amount budgeted ($1.5 trillion in this case), or at all outside that 10-year window. Republican congressional leaders have said they will renew the tax cuts at a later date, but that is tough to guarantee and would further add to the debt. Corporate tax cuts – from a top rate of 35% to 21% – are permanent.
The chart below shows the percentage of tax units (individuals and households) that are expected to receive a tax cut or tax increase in 2027. It is divided according to income percentile: the lowest 20% is the lowest-earning fifth (or quintile) of tax units by expanded cash income, 20-40% is the second-lowest-earning fifth, the top 0.1% is the highest-earning thousandth.
(To see what policies lead to this result, visit "Trump's Tax Reform.")
Looking at this data, Senate Majority Leader Mitch McConnell's (R-Ky.) promise that "nobody in the middle class is going to get a tax increase" rings hollow (he later said he "misspoke"). The majority of people from the 20th to the 90th percentile – encompassing every possible definition of "middle class" – will pay more in taxes in 2027. In the lowest quintile, 32.6% will pay more, far exceeding the 11.1% who will pay less.
To find the permanent beneficiaries of "the largest tax cut in our country's history," look at the highest-earning 5% of taxpayers. In the 95th to 99th percentiles, 58% get a tax cut in 2027. Of the top 1%, 75.9% do, and of the top 0.1% – the highest earning tax unit in every thousand – 91.9% get a cut; just 8% of that top thousandth will pay more.
Despite Treasury Secretary Steven Mnuchin's claims to the contrary, this tax cut for the highest earners will add considerably to the national debt. The $30 extra that each unit in the bottom quintile will pay, on average, can hardly offset the $1,260 average tax break that units in the top quintile receive (the top 0.1% gets an average $148,260 cut). While the majority of taxpayers will pay more, in other words, the mean change in federal tax bills in 2027 will be a cut of $160, due to the magnitude of cuts for the highest earners.