Trump’s Latest Tax Cuts: Wealthy Reap Far Larger Gains Than Typical W-2 Workers
New tax legislation delivers a windfall—but the distribution is anything but equal.
### The Great Wealth Acceleration
The mechanics are straightforward: the structure of the cuts funnels disproportionate benefits upward. Complex capital gains provisions and pass-through entity rules create avenues for significant savings that simply don't exist for a standard paycheck. It's a classic case of the tax code working better for those who can afford the best interpreters.
### The W-2 Worker's Share
For the typical employee, the changes are more marginal. Adjustments to brackets and standard deductions offer relief, but it's measured in percentages, not portfolios. The gap between the two outcomes isn't just noticeable—it's the central feature of the policy. One cynical observer might note it's less a rising tide that lifts all boats, and more a specialized crane hoisting the yachts.
The result is a sharp divergence in financial benefit, reinforcing a long-standing divide. In the end, the policy doesn't just cut taxes—it sculpts the economic landscape, favoring capital over labor with decisive clarity.
Report shows bigger refunds landing for higher earners
Forecasts show average refunds going up, but Michel said those averages hide how uneven the gains really are. He expects the average refund to rise by just under $1,000, compared to the usual $3,000 taxpayers have received in recent years.
White House Press Secretary Karoline Leavitt leaned on that number last week, saying “refunds could be about one-third larger than usual” and telling reporters to “remember that the next time Democrats try to talk about affordability.”
But averages are being pulled upward by a small group of people who qualify for new and expanded deductions.
Andrew Lautz from the Bipartisan Policy Center said the higher standard deduction will save most filers somewhere between under $100 and a few hundred dollars. But those who qualify for special breaks get much more.
Anyone able to use the new $40,000 cap on state and local tax deductions, a huge jump from the old $10,000 limit, can cut thousands from their tax bill.
Lautz said, “There will be substantially larger refunds for taxpayers who can enjoy those benefits — the tips, overtime, SALT deduction, auto loan interest deduction,” although he noted that group is a small slice of the population.
Much of the $3.4 trillion cost of the new tax law came from extending breaks first passed in 2017. Because the new benefits work through deductions instead of credits, richer households gain more.
Brendan Novak from the Penn Wharton Budget Model said “one dollar of deduction is more valuable to someone who is richer” since higher earners face higher tax rates. Trump delivered his campaign pledge to remove taxes on tips, overtime, and auto-loan interest by creating deductions for them. That structure means higher earners save more, though some limits still apply.
The Penn Wharton Budget Model found that people in the top fifth of income will take in the largest savings. Those who make between $376,000 and just under $960,000 are lined up for an average cut of $2,585.
Middle-income workers making between $49,000 and $90,000 get an estimated $650 increase in after-tax income. Most taxpayers will feel those differences when filing early next year, because Lautz said the IRS kept old withholding tables in place.
That means workers did not see tax savings in their paychecks throughout the year. The tax cuts were retroactive, but employers were never told to adjust withholding. So the refunds will come as one lump amount, landing months before the midterm elections.
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