Trump’s tax cuts give the richest 5% big breaks while everyone else pays more. How the middle-class is being left behind

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U.S. President Donald Trump has lauded the most recent tax season as a win for average Americans. His administration, too, attributes the “greater than ever before” (1) refunds to the “Working Family Tax Cuts” (2) and “the great, big, beautiful bill” (3).

Indeed, some of the changes the administration introduced promised “no tax on tips, no tax on overtime, no tax on Social Security.” Spokesman Kush Desai even said in a statement to NBC (4), “[The] vast majority of working-class seniors” and the “vast majority of everyday workers” will not pay any taxes on Social Security, tipped or overtime income. In theory this should raise tax refunds.

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But while Trump has said “[People] are getting so much more money than they thought,” the picture he paints gets more complicated when income enters the picture.

The latest IRS update (5) shows over 114.3 million returns had been processed as of April 10, 2026, with an average refund increasing from $3,055 to $3,397 — a $342 bump from a year ago. But the portion of those reaping the greatest benefits from Trump’s tax changes are those earning the most, not the working class families Trump’s administration is targeting in its messaging.

Here’s why the catch is in the details.

The Tax Foundation (6) found Trump’s “One Big Beautiful Bill” reduced individual taxes by roughly $129 billion for 2025, noting refunds “will undoubtedly rise for millions of taxpayers.”

The reality, according to the Tax Policy Center (7), is that 60% of those tax savings from Trump’s sweeping changes will benefit the richest 20% of households — those earning over $217,000.

And the savings are progressively greater the higher up the income ladder you go: A recent report by the progressive-leaning Institute On Taxation and Economic Policy (8) shows that those tax cuts disproportionately benefit the richest 5%, with the top 1% receiving $117 billion in tax cuts in 2026 — part of a $1 trillion reduction over the next 10 years.

The other catch is that with the One Big Beautiful Bill Act (9), Trump has also eliminated more than $40 billion over 10 years in funding for IRS tax enforcement that was earmarked specifically for investigating tax evasion by the wealthy, reports the organization.

This effectively removes disincentives and oversight for prospective tax cheats, who are also some of the wealthiest. This matters because the ROI on investigating the richest 10% (10) is $12 for every dollar spent (with some estimates going as high as $26 dollars for every dollar spent).

“We have the richest Americans who control massive amounts of the country’s wealth, who are literally able to opt out of the tax system entirely. Meanwhile, anybody who earns a salary is paying a lot of taxes,” Ray Madoff, a professor at Boston College Law School who studies tax policy, told NBC (4).

Similarly, many corporations will see little or no corporate income tax and tax cuts for foreign investors in U.S. businesses by $32 billion in 2026.

That leaves the bottom 95% of taxpayers, who will see tax increases on average, “driven by expanded tariffs and income tax changes.” Additionally, while the OBBBA extends earlier Trump tax provisions, it also enabled the termination of Biden’s health tax credit, which aimed to reduce health insurance coverage costs for Americans.

What this means is that though the average filer’s return may be up by $342, this average includes high-income earners and those who see greatest tax reductions, skewing the widely-publicized angle that Trump’s tax changes favor “working Americans.”

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Instead, middle-income Americans will see a rise in taxes by an average of $900 in 2026, the ITEP report says. And depending on where you live, this average may be higher: The middle 60% of Americans who reside in Wyoming, Nebraska and Florida will pay most (between $1,430 and $1,240 on average, respectively).

And while the “no tax on tips, no tax on overtime, no tax on Social Security” does exist, it exists with considerable caveats that aren’t as well publicized. This comes down to the way the taxes are structured and that they are only partial exemptions.

“We were disappointed,” Sherie Cummings, a casino cocktail waitress on the Las Vegas strip, told NBC (4). “I feel like a lot of the servers, bartenders, waitresses, tip earners were gaslit by the ‘no tax on tips.'” Filing with her husband, a bartender, she expected that she’d be able to write off the entirety of the $60,000 in tips the two brought in — a sizable portion of their joint wages. Instead they discovered the “no tax on tips” was capped at $25,000.

The tax cuts also exclude large groups such as railroad workers and truck drivers from overtime tax savings, while Social Security deductions include both low and higher earners.

With new exemptions and income limits now part of the tax code, figuring out what applies to your situation can be confusing. If you’re unsure how the new exemptions affect you, a financial advisor can help break down these policies and find ways to lower your tax bill.

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There is a cost to the tax cuts — it’s not just free money in your pocket. ITEP (8) puts this in perspective: Tax cuts are services lost for the very Americans that would benefit most from them.

“There’s no hiding the fact that the last year of tax policy has driven up costs for most Americans [while] slashing them for the wealthy,” said Michael Ettlinger, ITEP Senior Fellow and author of the report (11). “Tariffs and other federal tax increases have blindsided middle- and low-income taxpayers while the wealthy and corporations have received a hugely disproportionate share of the enacted tax cuts.”

The latest changes will only exacerbate income inequality in 2026, says the report (11).

The cumulative deductions from the OBBBA are projected to add $4.6 trillion to the federal government’s debt over the coming decade (part of a cumulative $22 trillion projected from 2025 to 2034). To offset the lost federal revenue from the tax cuts, the White House is also spending $1.2 trillion less — with the majority of the cuts coming from health care.

This ongoing debt can hit the economy through rising interest rates, high inflation and other direct cost of living consequences to many Americans. Many others are at risk of losing food assistance and health insurance benefits.

“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,” writes ITEP (8).

Tariffs still impact the highest-earning Americans, but they take up a much smaller portion of their income. Similarly, with the latest tax changes favoring high-income households, any costs attributed to tariffs are offset by the tax cuts favoring (8) this group.

What this looks like:

  • The top 1 percent gets a net tax cut equal to 0.4% of their income

  • The middle 20 percent sees a net tax increase equal to 1.2% of their income

  • The poorest 20 percent sees a net tax increase equal to 3.1% of their income

The 2026 ITEP report (11) found that the Trump administration’s most recent tax changes have “shifted the responsibility for funding for government toward working Americans while delivering substantial benefits to wealthy individuals, corporations and foreign investors, with long-term consequences for inequality and the federal budget.”

While Trump urged (1) Americans not to “spend all of this money in one place!” for many Americans, the economic reality is far bleaker, leaving them with less discretionary income this tax season — and for an increasing majority, even the basic necessities are drifting further beyond reach.

That’s why it’s important to find ways to lower your tax burden — these strategies might help.

One way to ease the pressure is by making sure you’re using every tax break available to you.

Contributions to tax-advantaged accounts — such as retirement plans or health savings accounts — can lower your taxable income while helping you build long-term financial security.

For seasoned investors with portfolios of $50K or more, you might consider diversifying your nest egg through a flat-fee self-directed retirement account with IRA Financial.

Simply answer a few questions — including the kinds of assets you would like to invest in and how much you’d like to start with — to prequalify for an account in just 90 seconds.

With over $5 billion in retirement assets under custody, guaranteed IRA audit protection, 25,000+ clients nationwide and a 97% client retention rate, IRA Financial can help you grow your retirement fund with alternative assets.

Cutting your tax burden can help you keep more of your income today — but safeguarding your investments is equally important for the long haul. With inflation concerns, market swings and geopolitical tensions still clouding the economic outlook, make sure your savings can weather current economic uncertainty.

Gold has long been viewed as a safe-haven asset during uncertain times. Because it tends to move differently than stocks or bonds, adding a portion of precious metals to your portfolio may help cushion the impact of market volatility while preserving purchasing power over time.

A gold IRA with the help of Priority Gold can help you to combine the diversification benefits of precious metals with the tax advantages of a retirement account.

If you opt for their platinum package, you can get free account setup and insured shipping and storage for up to five years. Plus, you can also rollover your existing IRA or 401(k) into a precious metals IRA with Priority Gold — tax and penalty free.

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Qualifying purchases can also get up to $10,000 in complimentary silver.

Another strategy high-net-worth investors use to manage their tax burden is to invest in assets that come with built-in tax advantages. Real estate is a common example, largely because of how property ownership is treated under the tax code.

Tools like bonus depreciation and 1031 exchanges can allow property owners to defer or, in some cases, reduce taxes on gains from real estate investments, especially when profits are rolled into new properties.

The good news is you don’t need to be in the top 5% to potentially benefit from these kinds of strategies.

Platforms like Arrived allow you to invest in shares of vacation and rental properties across the country with as little as $100.

Arrived’s specialized 1031 exchange program helps you navigate the entire exchange process, including property sourcing, qualification and reinvestment — all while you maintain tax deferral benefits.

To get started, simply browse through their selection of vetted properties. Arrived distributes any rental income generated by properties to investors monthly, allowing you to potentially set up a passive income stream.

And for a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match.

— With files from Dragana Kovacevic

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We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

Truth Social (1); U.S. Congress (2); The New York Times (3); NBC News (4); Internal Revenue Service (5, 9); Tax Foundation (6); Tax Policy Center (7); Institute on Taxation and Economic Policy (8, 10, 11)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

 
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