Extending Trump tax cuts would deepen wealth gap, experts warn

As the Trump administration moves to extend sweeping tax cuts enacted in 2017, new research suggests the benefits may continue to flow disproportionately to the country’s wealthiest households – raising concerns among economists and policy analysts about the growing concentration of wealth in the United States.

According to Federal Reserve data released in March, the top half of American households now control 97.5 percent of all US assets, with the top 1 percent holding nearly one-third of the nation’s total wealth.

While every income group has seen asset growth since the 1980s, the Federal Reserve data show that most of those gains for lower-income households have come in recent years. The bottom 50 percent of households held $4 trillion in assets at the end of 2024, up from $700 billion in 1989. Still, their overall share has shrunk due to more substantial gains by higher-income groups.

While the administration says the tax policy is intended to support Americans broadly, some independent analyses point to a widening gulf in outcomes between income groups, with higher-earning individuals tending to win out.

A March 19 analysis from the Yale Budget Lab estimates that if the Trump tax cuts are extended and federal assistance programs are reduced to help offset the cost, the lowest-earning 20 percent of Americans would see an average annual net loss of $1,125. In contrast, the top 1 percent could see an average gain of $43,500.

“The combination is pretty devastating” for lower-income households, Emily DiVito, senior adviser for economic policy at Groundwork Collaborative and a former policy adviser at the Treasury Department told CBS News. “The wealth inequality trend we have been experiencing for the last 40 years would be exacerbated.”

DiVito noted that high-income households tend to have more discretionary income available for investing in assets like stocks and bonds. Any added tax savings, she said, could allow those households to further accelerate their wealth growth over time.

President Trump, speaking before Congress on March 4, said his goal is to make the income tax cuts permanent. “We’re seeking permanent income tax cuts all across the board,” he said, declaring that his tax cuts are "for everybody."

The administration also aims to raise revenue through tariffs, including 25 percent import duties on autos, steel, aluminum and other goods. A new round of tariffs is expected to be announced April 2 on what Trump has touted as "Liberation Day," part of an effort to impose reciprocal tariffs aimed at balancing trade relationships.

Economists say the tariff strategy could disproportionately impact low- and middle-income households, who spend a larger share of their income on basic goods and services. “Tariffs are a regressive tax, meaning people with lower incomes will pay a larger share of their earnings in taxes than high-income people,” wrote Adam Hersh and Josh Bivens of the Economic Policy Institute in a March 28 analysis. “Tariffs are essentially a consumption tax, and consumption as a share of income tends to fall as incomes rise.”

In a potential shift, some Trump administration officials are now reportedly discussing whether to allow tax rates on the highest earners to rise as a way to help offset the cost of targeted tax relief for workers who earn tips. According to Axios, one option under consideration would be to let the top marginal tax rate return to 39.6 percent – its pre-2018 level – up from the current 37 percent.An unnamed White House official told Axios the proposal could free up revenue under budget rules and offer political cover amid concerns about perceived benefits for high earners.

Although no final decisions have been made, the approach reflects growing awareness of the potential economic and political trade-offs involved in pursuing further tax reductions. A March poll by the Pew Research Center found solid majority support for raising tax rates for higher-earning individuals, with three-fifths favoring hikes aimed at those earning more than $400,000 annually.