Senate Republicans plan to soon vote on their chamber’s version of the tax and spending package passed by the House of Representatives on May 22. Like its House counterpart, the Senate reconciliation bill makes permanent the provisions of the 2017 tax law that will otherwise expire and makes many additional changes beyond that. This analysis examines the Senate legislation’s tax provisions and provides numbers generated with the ITEP microsimulation model.
While the Senate version differs from the House bill in some ways, it has essentially the same effects, favoring the richest taxpayers and providing working-class Americans with relatively small tax cuts that would in many cases be more than offset by the import taxes, or tariffs, imposed by President Trump.
The Senate bill would have the following effects on taxpayers, which are all very similar or nearly identical to those of the House bill:
- Under the Senate bill, 69 percent of the net tax cuts would go to the richest fifth of Americans in 2026, only 11 percent would go to the middle fifth of Americans, and less than 1 percent would go to the poorest fifth.
- The richest 5 percent alone would receive 45 percent of the net tax cuts next year.
- The richest 1 percent of Americans would receive an average net tax cut of $61,000, many, many times more than the average tax cut received by other income groups.
- The richest 1 percent of Americans would receive a total of $107 billion in net tax cuts in 2026. The middle 20 percent of taxpayers on the income scale, a group that has 20 times the number of taxpayers as the richest 1 percent, would receive less than half that much, $53 billion in net tax cuts that year.
- The $107 billion in net tax cuts going to the richest 1 percent next year would exceed the amount going to the entire bottom 60 percent of taxpayers (about $76 billion).
- The effects of President Trump’s tariff policies alone offset most of the tax cuts for the bottom 80 percent of Americans. For the bottom 40 percent of Americans, the tariffs impose a cost that is greater than the tax cuts they would receive under this legislation.
- Even foreign investors who own shares in U.S. companies would benefit more than many Americans. These foreign investors would enjoy $31 billion in tax cuts in 2026 compared to just $1.5 billion for the bottom 20 percent of Americans.
- The legislation provides the greatest rewards to high-income people living in states that have low state and local taxes on the wealthy. In these states, high-income people are not much affected by the cap on deductions for state and local taxes, which the Senate bill would make permanent. As illustrated in Figure 6, the states where the richest 1 percent of residents receive the largest average net tax cuts would mostly be states that have particularly unfair tax systems because they have no personal income tax.
These figures do not include other potential costs to families in the bill, such as deep cuts to Medicaid and food assistance. These cuts would have adverse health and financial implications for families that directly benefit from these programs. The cuts would also harm others in communities that are broadly dependent on these funding streams—such as rural communities, which would see hospital closings.
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Compared to its House counterpart, the Senate bill makes certain provisions more generous, including corporate tax breaks that it makes permanent rather than temporary. Other tax breaks are less generous in the Senate bill to prevent the cost from dramatically exceeding that of the House bill.
- The Senate legislation includes permanent corporate tax breaks (involving more generous versions of tax rules for bonus depreciation, research, and limits on interest deductions) that lawmakers have attempted to enact in recent years. The House bill provides them temporarily.
- Compared to the House bill the Senate bill provides a less generous extension of the 2017 law’s deduction for pass-through business owners (keeping the deduction at 20 percent vs the 23 percent provided by the House bill).
- The Senate bill also provides a less generous expansion of the Child Tax Credit (increasing the maximum credit to $2,200 vs. $2,500 in the House bill, although the Senate version makes the CTC expansion permanent, unlike the House version). Both are up from the current credit of $2,000, though down from the Biden credit of $3,600 for children under 6 and $3,000 for older children, and both would leave out the millions of children whose parents earn too little to receive the full CTC.
- The Senate bill is less generous in its treatment of the cap on deductions for state and local taxes (SALT). Both bills extend the 2017 tax law’s $10,000 cap on deductions for SALT, but the House bill imposes a cap that is as high as $40,000 for some taxpayers. The Senate bill, as of this writing, extends the $10,000 cap without changing it.
- The Senate legislation includes a “revenge tax” meant to punish companies based in countries participating in the global minimum tax. But unlike the House bill, the Senate version effectively delays it so that it is not included in this analysis.
- The Senate legislation would make tax breaks for so-called “Opportunity Zones” permanent while the House bill would extend them temporarily. Under both bills revenue impacts do not take full effect during the first year after enactment, and thus Opportunity Zones are not included in this analysis.
- Both bills provide a tax break, mostly to the rich, for contributing to funds that finance vouchers for public schools, but the Senate version of this provision does not take effect during the first year after enactment and is therefore not included in this analysis. The Senate’s version of the provision is permanent while the House version is temporary.
The Senate and House bills are, however, identical in most significant features. Just as in the House bill, the Senate bill has three categories of tax provisions providing the biggest tax cuts to the richest 1 percent: changes in tax rates and brackets, the extension of the pass-through deduction (section 199A), and a collection of business tax changes (which affect corporations and other businesses).
Each of these three categories cuts taxes for the top 1% by around $30,000 on average next year. The Alternative Minimum Tax (AMT) and estate tax provisions provide more for the rich on top of that.
Provisions changing itemized deductions (most importantly the cap on itemized deductions for state and local taxes, or SALT) claw back an average of $41,000 of the tax cuts for the richest 1 percent. The SALT cap serves as a very partial limit on tax cuts for the richest Americans.
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Revenue Impact of Tax Provisions Included in this Analysis of Senate Reconciliation Bill in 2026
| Provisions | Revenue Impact |
|---|---|
| Extending and Modifying TCJA Provisions Expiring End of 2025 and Related Changes | |
| Rates and Brackets | —$205 billion |
| Standard Deduction | —$120 billion |
| Personal Exemptions | +$145 billion |
| Child Tax Credit | —$89 billion |
| Pass-Through Deduction | —$79 billion |
| Alternative Minimum Tax | —$149 billion |
| Itemized Deductions | +$142 billion |
| Estate Tax | —$20 billion |
| Recapture Benefits in Lower Brackets | $0 |
| Total TCJA Provisions Expiring End of 2025 | —$375 billion |
| New Provisions Proposed as Middle-Class Tax Cuts | |
| Deduction for Tips | —$10 billion |
| Deduction for Overtime Pay | —$23 billion |
| Enhanced Deduction for Seniors | —$21 billion |
| Exclusion for Car Loan Interest | —$6 billion |
| Total New Provisions Proposed as Middle-Class Tax Cuts | —$60 billion |
| Business Tax Breaks (excluding pass-through deduction in TCJA) | |
| Reinstate bonus depreciation | —$66 billion |
| Reinstate research expensing | —$20 billion |
| Reinstate more generous limits on deductions for interest | —$6 billion |
| New international corporate rules | —$24 billion |
| Special depreciation allowance for qualified production property | —$34 billion |
| Section 179 small business expensing expanded | —$4 billion |
| Extension and modification of clean fuel production credit | —$3 billion |
| Exceptions to bar on business meals deductions | +$3 billion |
| Total Business Tax Breaks | —$162 billion |
| Other Tax Provisions | |
| Repeal and phase out green tax provisions | +$41 billion |
| Limits on ACA credits | +$14 billion |
| Strengthen limit on deductions for high compensation | +$1 billion |
| 1 percent floor on corporate charitable deductions | +$2 billion |
| Treatment of payments from partnerships to partners for property or services | +$2 billion |
| Punish companies of countries implementing global minimum tax | +$1billion |
| Total Other Tax Provisions | +$61 billion |
| TOTAL | —$529 billion |
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