Trump's Policies Are Raising Taxes and Costs for Every Income Group Except the Richest 1%
The tax cuts are being swallowed by the tariffs
Trump ran on cutting taxes. But once tariffs are counted, his policies are raising taxes and costs this year for every income group except the richest 1%, per a new report from the Institute on Taxation and Economic Policy. The reason: tariffs, which are largely passed on to consumers as higher prices, outweigh the tax cuts for most Americans. Even the right-leaning Tax Foundation calls the tariffs the largest US tax increase as a share of GDP since 1993.
Once tariffs are counted, Trump's policies are raising taxes and costs this year for every income group except the richest 1%, according to a new report from the Institute on Taxation and Economic Policy.
Middle-income households pay about $1,700 more
The ITEP analysis, published October 8 and authored by federal policy director Steve Wamhoff, combined three forces: the new tax provisions in the One Big Beautiful Bill Act, the expiration of the Enhanced Premium Tax Credit for health insurance, and price increases during Trump's second term above what had previously been projected. The middle 20% of Americans will pay an average of about $1,700 more in 2026, the poorest 20% will pay roughly $750 more, and the richest 1% will pay an average of about $12,560 less.
"The tax cuts Americans were promised, which were tilted heavily to the top to start, are being overwhelmed by higher prices and higher health care costs for most families," Wamhoff said. "When you look at the full picture rather than tax cuts in isolation, the result is striking: the typical American in every income group is paying more, except that the richest 1% is the one group that comes out ahead." The report includes state-by-state estimates of the combined effect.
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Options market and stocks to watch
If tariff costs are landing on consumers rather than exporters, the squeeze shows up in household budgets before it shows up in trade data: XLY carries the discretionary spending that gets cut first, XLP is the defensive rotation if it does, and import-heavy retailers like WMT sit on the front line of pass-through pricing.
Watch consumer spending and retail earnings commentary for tariff pass-through, and follow tax and trade policy on the Unusual Whales news feed.
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