The economic policies introduced by US President Donald Trump are expected to increase taxes and other costs for most Americans in 2026, while the wealthiest 1% of earners are expected to save money, according to a new report by the Institute on Taxation and Economic Policy (ITEP), a left-leaning economic think tank.
Steve Wamhoff, federal tax policy director at ITEP, said the tax cuts introduced by the Trump administration have not been enough to offset the higher costs faced by most Americans. A White House report released in June on Trump’s tax cuts said the changes provided the largest share of tax relief directly to millions of low- and middle-income Americans. It also introduced additional tax cuts.
These include new tax provisions under the One Big Beautiful Bill Act, the end of COVID-era Affordable Care Act health insurance tax credits, and price increases linked to tariffs, the Iran war and immigration policies. These additional costs could help explain why consumer confidence in the US is close to a record low and household debt is increasing, even as other measures suggest that the US economy remains strong. The ITEP report comes from a think tank that is generally critical of Trump’s economic policies. The White House, however, has offered a different assessment of the president’s impact on the US economy. However, some economic policy experts have questioned parts of the ITEP report. The report also examines the expiration of COVID-era health insurance tax credits under the Affordable Care Act. These credits had helped millions of Americans pay less for health insurance. Adam Michel, director of tax policy studies at the libertarian Cato Institute, disagreed with treating the end of the health insurance tax credits as a new Trump policy. These include tariffs, the Iran war and restrictive immigration policies. To estimate these costs, ITEP compared actual price increases during Trump’s second administration with inflation projections made by the Congressional Budget Office when Trump returned to the presidency. Both the Cato Institute and AEI generally support lower taxes, but their experts disagreed with some parts of ITEP’s calculation. Pomerleau of AEI questioned whether inflation unrelated to tariffs should be counted entirely as an additional cost to consumers. He argued that prices and incomes often rise together during periods of inflation, allowing consumers to cover some of the higher expenses with increased earnings. However, the impact of Trump’s tax cuts remains a subject of debate among policy experts.
The report, released on October 8, examines three major policy changes under Trump’s second administration. The One Big Beautiful Bill Act extended tax cuts approved during Trump’s first term under the 2017 Tax Cuts and Jobs Act. However, ITEP’s analysis focuses only on new tax policies enacted by Congress and Trump in 2025. Based on this comparison, the report estimated that Trump’s price-increasing policies will cost a middle-income American an additional $1,850 in 2026. An analysis by the nonpartisan Tax Foundation found that the original 2017 Trump tax cuts reduced average tax rates across all income groups, including people who pay very little in taxes.
Because they have already been benefiting from those reductions for several years, wamhoff added that many Americans may not notice the extension of existing tax cuts. Because the president and Congress could have extended them, iTEP counts the end of these credits as a policy decision by the Trump administration. Because they generally pay more in taxes to begin with, michel of the Cato Institute said higher-income earners naturally receive larger dollar-value savings from tax cuts.
They said the findings depend on how the costs and benefits of Trump’s policies are calculated. Kyle Pomerleau, a senior fellow at the libertarian American Enterprise Institute (AEI), said most Americans would have faced higher taxes if the earlier tax cuts had been allowed to expire. The biggest new costs for most Americans come from policies that increase consumer prices, according to ITEP. Michel of the Cato Institute said it was fair to argue that these policies have made life more expensive for Americans. He also said tariffs act like taxes on American consumers . Pomerleau said that, when rising incomes are taken into account, the overall effect of inflation on people’s well-being could balance out.
The ITEP report acknowledges in an appendix that, when the extension of the earlier tax cuts is included, all but the lowest-income Americans receive tax savings under the law. He argued that the benefits of these tax cuts are outweighed by rising expenses for most people, except the richest Americans, according to USA Today. Wamhoff said the report aims to show how Americans are experiencing the economy during Trump’s second term, as noted by USA Today. He said the credits were originally meant to be temporary and that Democrats could have made them permanent while they controlled the White House but did not do so, according to USA Today. However, the latest federal inflation report cited by USA Today showed that prices were rising faster than wages, meaning many Americans were not seeing their earnings keep pace with living costs.
Middleton also criticised Democrats over their claims about affordability. He said Democrats support policies that, according to the White House, would cost every American household $355,000 over 10 years and add $49 trillion to the federal deficit.
The poorest 20% of Americans are expected to pay about $750 more in taxes and other costs. In contrast, the wealthiest 1% are expected to save about $12,560 in 2026. For a middle-income American, the One Big Beautiful Bill Act is expected to provide about $380 in additional tax savings in 2026. If tax cuts that were already in effect are also included, the same taxpayer would save another $780, the report estimated. However, ITEP said other Trump policies that increase prices are expected to cost the same middle-income American about $1,850 in 2026. The report estimates that the expiration of these health insurance tax credits will cost an average middle-income American about $230 in 2026. The wealthiest 1% are the only group whose tax savings are large enough to outweigh the additional costs, according to him. When the effects of tax changes and additional costs are combined, nearly every income group is expected to pay more in 2026 under Trump’s policies. ITEP estimates that price increases linked to Trump’s policies will cost the wealthiest 1% an additional $15,990 in 2026. However, new tax cuts are expected to save this group $28,550, leaving them with an overall saving of $12,560. Overall, the ITEP report argues that the additional costs linked to Trump’s policies will outweigh tax savings for most Americans in 2026.
Because of Trump’s policies, a typical American in the middle 20% of earners is expected to pay about $1,700 more in taxes and other costs in 2026. Because their tax savings are greater than the additional costs caused by inflation and other policies, the report estimates the following changes in taxes and other costs for American households in 2026: The report says the wealthiest 1% are expected to benefit. Because their tax cuts are large enough to cover the estimated increase in their other costs, the wealthiest 1% are expected to be the main exception.
These policies include tariffs, immigration restrictions and the war in Iran. The estimate measures the additional inflation linked to these policies. Other organisations, including the Congressional Budget Office and the Peter G. These findings support the argument that the benefits of the law are not distributed equally across income groups.
White House spokesman Matthew Middleton said Trump’s economic policies have helped stop the inflation crisis under former President Joe Biden, supported economic growth and created private-sector jobs. Wamhoff said that when tax changes and additional costs are considered together, Americans across nearly all income groups are expected to be worse off. He added that the administration expects more economic gains over the next two years, according to USA Today. Peterson Foundation, have also found that tax cuts under the One Big Beautiful Bill Act favour higher-income households, according to USA Today.
