The Consequences of 18 Months of Trump-Republican Tax Policy and Rising Prices

Introduction and Summary

The first 18 months of President Trump’s second term have brought major changes in U.S. tax policy and taken several actions that have boosted inflation. The president, in concert with Congress, has dramatically increased tariff taxes, enacted large tax cuts that primarily benefit the well-off and corporations, dramatically curtailed IRS enforcement, and issued legally problematic tax regulations. In addition, a war and reductions in the workforce due to immigration policy have restricted the supply of a range of goods and services and boosted prices. These changes have had significant impacts on the lives of the American people.

Tax policies and boosted inflation have, overall, cost middle-income Americans an average of $1,670 in 2026 relative to what they would have paid had tax policies that existed at the beginning of 2025 simply continued and inflation remained as projected right before Trump returned to the White House.

The wealthy, on the other hand, are contributing significantly less. Over the next 10 years, the wealthiest 1 percent is slated to pay at least a trillion dollars less in taxes than if Congress and the President had done nothing.

The direct effect on corporations has also been substantial as more and more companies are paying little or nothing in federal corporate income tax.

The largess has not been limited to the American wealthy and corporations: foreign owners of U.S. businesses will save $32 billion in taxes in 2026.

Tax cuts have come at a substantial price. The legislated tax reductions passed by Congress and signed by the president in the One Big Beautiful Bill Act (OBBBA) are forecast to add $4.6 trillion to the federal government’s debt over the coming decade. In the same bill, to whittle down that price tag, net spending cuts amount to a $1.2 trillion reduction, with the lion’s share coming from healthcare.

While much of what has happened under President Trump has been done by duly elected officials, acting within legal bounds, the administration has also shown little deference to the rule of law, imposing illegal tariffs, illegally implementing regulations, and gutting IRS enforcement initiatives.

Policy-Fueled Inflation Drives up Costs for Most Americans who get Little or No Reduction in Taxes

Higher Costs

The biggest changes affecting most Americans in 2026 are inflation-boosting tariffs, war-related price increases, and higher prices due to the loss of immigrant workers.

While President Trump claims that foreigners pay the tariffs, the claim is not taken seriously by independent analysts. Even U.S. corporations admit Americans are paying them.

In addition, the Iran war has caused oil prices to surge. This has had a direct impact on fuel prices paid by consumers, and been felt in rising prices of goods and services which are affected by higher transportation costs or otherwise rely on oil as an input. Increased gas and diesel prices caused by the war have cost Americans over $100 billion so far.

Immigration policy has also played an important role in higher prices. The loss of foreign-born workers has created labor shortages in key industries such as agriculture and construction. This has led to higher prices for food, housing, and other goods and services.

Misguided Tax Policy

In addition to tariffs, the war, and immigration policy, tax policy choices made by Congress have affected the pocketbooks of the American people.

Without Congressional action, several tax provisions were set to expire at the end of 2025. Most were from the tax bill passed in 2017 during the first Trump administration. One measure, a tax credit to help Americans defray some of the cost of health insurance, was passed during the Biden administration. The authors of these provisions intended the measures to be ongoing; they were passed as temporary measures primarily to minimize the ostensible 10-year costs to comply with Congressional budget rules.

In OBBBA, Congress largely extended the earlier Trump tax bill provisions, which are skewed to benefit the better-off, while it allowed the termination of the Biden health tax credit, which exclusively benefited middle- and low-income taxpayers. In addition to the choices Congress and the President made regarding which expiring provisions to extend and which not to extend, OBBBA also added fresh tax breaks, including corporate tax cuts and partial exemptions of tips and overtime income. Notwithstanding the nod to working Americans, these added tax cuts also disproportionately benefit the wealthy.

The Bottom Line for the Middle 60 Percent

Modeling the tax changes relative to if tax policy had been unchanged, and accounting for the extent to which inflation has exceeded forecasts from the Congressional Budget Office prior to the beginning of the presidential term, we can see the net impact of the policy approaches of President Trump and his allies in Congress.

When added together, these changes result in the middle 60 percent of Americans losing $1,670, on average, in 2026. Figure 1 shows the cost of the excess inflation combined with tax changes for the middle 60 percent for each state and the District of Columbia.

Figure 1

Average Costs (Including Taxes and Prices) for Households in the Middle 60% are Up by $1,670 in 2026

Increase in Income Inequality

The tax policy changes under President Trump and Congress are increasing income inequality. For those in the lower income 99 percent of the population, the actions and inaction described in the previous section are resulting, on average, in a net loss. It’s a different story, however for the richest 1 percent. Although increased costs do affect higher-income Americans, they can well afford them—with those price increases claiming a much smaller share of their income than for middle- and low-income people. For the top 1 percent, the OBBBA tax cuts are much larger than the cost of increased inflation. As a result, the top 1 percent is getting even farther ahead under the policies of President Trump and his allies in Congress.

The average net impact for the range of income groups can be seen in Figure 2. The top 1 percent sees a net gain equal to 0.4 percent of their income, the middle 20 percent sees a loss equal to 2.7 percent of their income, and the poorest 20 percent sees a loss of 5.7 percent of their income.

More detail and national and state-by-state tables can be found here.

Big Tax Cuts Fuel Growing National Debt

When official budget scorers project budget deficits and the national debt, they assume that law will remain unchanged. That means they assume tax provisions set to expire in the law will actually expire—even if that doesn’t reflect the genuine intent of policymakers or political reality. OBBBA’s extension of expiring tax provisions, combined with its new tax cuts, significantly increased official estimates of future deficits and debt. As of February 2026, the Congressional Budget Office projects federal budget deficits to be a cumulative $22 trillion in the 10 years from 2025 through 2034. The OBBBA tax cuts are responsible for $4.6 trillion of that.¹

There is much debate as to the level of debt the country can accrue before there are significant economic problems. Some things are, however, not in serious dispute.

First, whether we know the exact level or not, there is a point at which the debt starts to cause significant economic problems, whether in the form of rising interest rates, high inflation, or other consequences.

Second, the higher the debt, the more debt service eats away at other priorities. In 2026, interest on the debt is slated to be 14 percent of federal spending, rising to 18 percent by 2035. The trillion dollars of interest projected for 2026 is more than the projected spending on defense, Medicaid, and almost every other individual government agency or program.

Third, the country has looming spending obligations that will be harder to manage with higher debt. Social Security and Medicare are the most widely noted but there are many other unmet needs and areas of rising costs.

Adding $4.6 trillion in debt to cut taxes for profitable corporations and the very wealthiest individuals would always be problematic policy, but it is particularly reckless given the country’s current debt obligations and given looming spending obligations. In short, this was not the time to add $4.6 trillion in debt by cutting taxes for people and companies that don’t need it.

Tax Contributions by the Wealthy Plummet

In 2026, the highest-income 20 percent will contribute $391 billion less to the federal budget than if Congress and President Trump had made no changes in tax law. Of that, the richest 1 percent alone are contributing $127 billion less. Over the next 10 years the cut for the top 1 percent adds up to a trillion dollars. To put the $127 billion going to the top 1 percent in 2026 in perspective, it is more than the federal government will spend in 2026 on the combined budgets of the Department of Education, Department of Transportation, Department of Justice, State Department, National Aeronautics and Space Administration, Environmental Protection Agency, National Endowment for the Humanities, and National Endowment for the Arts.

To put the amount in a context outside of government, ITEP, in July, compared the 2026 tax savings for the richest 1 percent to a variety of dollar levels in the private economy. For example, $127 billion could buy every Major League Baseball team (all of them together) or pay for the combined cost of every wedding in the country for a year.¹

In addition to the hundreds of billions in tax cuts from OBBBA, the wealthiest have also saved many billions with the elimination of more than $40 billion over 10 years in IRS tax enforcement funding that was aimed specifically at cracking down on tax evasion by the wealthy. The Trump administration has also, administratively, strangled IRS enforcement initiatives targeted at high-wealth tax sheltering.

Figure 4

More Corporations are Paying Little or Nothing in Taxes

OBBBA included large tax cuts for corporations, and the administration has added on to the benefits of these tax cuts with legally doubtful regulatory changes. Many of the corporate income tax cuts in OBBBA are retroactive, reducing companies’ 2025 tax bills and resulting in more and more corporations disclosing that they had very low income tax liability, or none at all, for the year.

A new ITEP report finds that large corporations are paying at lower rates than at any time since ITEP began doing its corporate tax reports over 40 years ago. It also specifically finds that 114 large, profitable, companies paid zero federal corporate income tax at all in 2025. This includes Tesla ($5.7 billion in profits), Palantir ($1.6 billion in profits), H&R Block ($530 million), Citigroup ($4.4 billion), CVS ($8.0 billion), Walt Disney ($8.3 billion), Kohl’s ($290 million), United Airlines ($4.3 billion) and DoorDash ($1.7 billion).

Even among companies that are paying something, it is often very little. For example, Amazon paid just 1.4 percent of its $89 billion in U.S. profits in federal corporate income tax while Meta paid 3.6 percent on $79 billion in profits, ExxonMobil paid 1.3 percent on $11 billion in profits, Coca-Cola paid 1.6 percent on $5.6 billion, and Uber paid 3.4 percent on $4.8 billion. Table 3 shows a sample of prominent companies, their profits and their effective tax rates.

Figure 5

These companies’ ultra-low tax bills are just the tip of the iceberg of what has been done to business taxes in the first year of President Trump’s second term. From OBBBA alone, corporations and other businesses will pay $234 billion less in 2026 and $1.7 trillion less over 10 years.

Foreign Investors Get Big Tax Cuts Too

With the extensive foreign ownership of companies doing business in the U.S., foreign shareholders are significant beneficiaries of OBBBA’s corporate tax cuts. A total of $32 billion in tax savings from OBBBA will go offshore in 2026. With the only way many foreign shareholders pay U.S. taxes being indirectly through the taxes paid by the companies they invest in, many foreign shareholders are likely to end up paying zero U.S. corporate tax despite benefiting from the U.S. economy and the role of the government in sustaining it.

As Figure 6 shows, foreign investors get a larger share (6 percent) of the OBBBA tax cut than the lowest-income 40 percent of the American population combined (2.4 percent). The highest income 20 percent of the U.S. population, plus foreign owners/shareholders of U.S. businesses, garner three-quarters of the total tax reductions of OBBBA.

The Rule of Law Has Been Undermined

The Trump administration’s initial tariffs were ruled illegal by the Supreme Court. The tariffs that have initially replaced them are also illegal.

The Trump administration has also issued regulations that have significantly cut taxes for corporations. These too were done without a proper legal basis. Unlike with tariffs and other illegal administration activity, the courts may not block lawless regulations that reduce taxes. Some case law suggests that federal courts may deny “standing,” the right to sue, to anyone who isn’t affected in a very concrete, negative way, by an illegal regulation. Regulations that cut taxes may not negatively affect anyone sufficiently directly for the courts to grant standing, hence blocking litigation to challenge them.

The administration also put taxpayer privacy at risk with its IRS-ICE arrangement.

Finally, in addition to violating the law, the administration is making it easier for others to do so. The drastic cuts to IRS enforcement encourage the spread of lawlessness from within the Trump administration to the taxpaying public. Those who can afford to engage in complicated, hard-to-detect tax evasion schemes are well-positioned to evade taxes more than ever.

Conclusion

The Trump-Republican policies of the first year and a half of President Trump’s second term described here have adversely affected most Americans while benefiting the wealthy and foreign shareholders. This has been accomplished through a mix of legislative action, legal executive action, and illegal executive actions by the administration.

Unfortunately, it could get worse. The administration is being heavily lobbied to add to its unlawful regulatory record by indexing capital gains for inflation—which would be a benefit hugely skewed to the wealthy. In addition, the congressional Republican Study Committee has a tax plan that would, likewise, be of substantial benefit to those with the highest income and wealth.

Methodology

The methodologies for the numbers in this report can be found in the methodologies in the hyperlinked reports where they were initially published. Additional income tax analysis was conducted using the ITEP Microsimulation Tax Model.