Speaker of the Home Mike Johnson, R-La., speaks to reporters as he walks again to his workplace because the Home of Representatives waits to vote on President Trump’s “huge stunning invoice” reconciliation package deal on July 3, 2025.
Invoice Clark | CQ-Roll Name, Inc. | Getty Pictures
A large package deal of tax cuts President Trump signed into legislation on Friday could be a windfall for the wealthiest U.S. households. However the dimension of that monetary profit relies upon largely on the place high-income taxpayers reside, in line with a brand new evaluation by the Institute on Taxation and Financial Coverage.
The laws would give the highest 1% of U.S. households a mean tax reduce of about $66,000, or about 2.4% of their earnings, in 2026, in line with ITEP, a left-leaning suppose tank. (These households have incomes of $917,000 or extra per yr, averaging about $2.7 million, it stated.)
Some households stand to get a a lot larger tax profit.
The wealthiest households in three states — Wyoming, South Dakota and Texas — would see their annual tax payments fall by greater than $100,000, ITEP discovered.
In Wyoming, the highest 1% would see their taxes fall most: by a mean of about $133,000 (or 3% of earnings) in 2026, it stated. The typical earnings of the highest 1% within the state is about $4.5 million.
“The invoice is most advantageous to conservative-leaning states which have a whole lot of very rich individuals residing inside their borders,” stated Carl Davis, ITEP’s analysis director.
These states additionally do not levy private earnings taxes, he stated.
Wyoming and Texas “are basic examples of states with a whole lot of rich individuals and which tax these rich individuals extremely flippantly,” Davis stated.
Why the rich get a big tax reduce
Senate Republicans handed the laws, initially known as the One Large Stunning Invoice Act, on Tuesday with the slimmest of margins. Home Republicans handed the invoice on Thursday, and despatched it to the president for his signature.
The laws affords greater than $4 trillion of internet tax cuts over a decade, with most advantages accruing to higher-income households, analyses have discovered. It additionally slashes the social security internet, slicing billions of {dollars} from applications like Medicaid and meals stamps meant to assist decrease earners.
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The centerpiece of the invoice is an extension of 2017 tax cuts enacted throughout President Trump’s first time period in workplace.
General, the laws lowers earnings tax charges, exempts a bigger share of rich estates from taxation and affords tax breaks to enterprise house owners. These are among the many core methods the GOP invoice advantages high-income households, Davis stated.
It additionally caps the quantity of state and native earnings taxes and property taxes that households can deduct from their taxable earnings every year, at $40,000.
That “SALT” coverage does not negatively impression rich residents in states like Wyoming, South Dakota and Texas, the place residents do not owe state earnings tax, Davis stated. However it has a big impression on states with excessive state and native earnings taxes and property taxes.
In different phrases, high-income residents of Wyoming, South Dakota and Texas usually get a lot of the tax upside and never a lot draw back, he stated.
Conversely, the very best earners in California and New Jersey would see a smaller tax reduce in 2026, averaging about $34,000 and $21,000, respectively, ITEP discovered. That represents about 1% of their earnings in every state.
Separate analyses have discovered that the wealthiest households will reap the most important monetary advantages from the GOP invoice.
The highest 20% of U.S. households (incomes greater than $217,000 a yr) would get a tax reduce equal to three.4% of their after-tax earnings in 2026, in line with the Tax Coverage Heart. In the meantime, the underside 20% would get a 0.8% tax reduce.
Its evaluation solely examined the tax parts of the laws.
General, extra complete analyses that additionally account for cuts to applications like Medicaid and the Supplemental Diet Help Program, the bottom earners could be worse off, in line with analyses by the Funds Lab at Yale College and the Congressional Funds Workplace, which modeled comparable laws handed by the Home final month.
