Donald Trump doesn’t just love billionaires, he loves multimillionaires too

The US tax policy has been criticized for depriving the government of revenue and serving the interests of the rich, with the House passing a version of Donald Trump's One Big Beautiful Bill Act that paired a $5tn-plus tax cut with $1tn-plus of cuts from food stamps and Medicaid. House speaker Mike Johnson explained that the beneficiaries of the tax cuts were "small business owners" that "provide the jobs in every community in America", but this claim has been disputed as the tax cuts overwhelmingly serve the interests of millionaires. The tax cuts specifically benefit "pass through" businesses, which employ half of all workers and generate more than half the nation's business income, and are freed from paying the corporate income tax rate, with their untaxed profits distributed to their owners who face lower individual tax rates.

The consequence of this tax policy is that it costs the budget billions of dollars, with the deduction for pass-through business income made permanent in the "big beautiful bill" last year, costing the budget $820bn over a 10-year period, almost as much as was cut from the Medicaid budget. According to the Urban-Brookings Tax Policy Center, about 57% of the $1.3tn in pass-through income in 2022 went to 890,000 people in the richest 1% of the population. A study by economists at the Department of the Treasury, the Federal Reserve Bank of Minneapolis, and Dartmouth University found that 35% of the total deductions in the year after the 2017 tax cut, a cold $54bn, flowed to taxpayers with income of at least $1m. This suggests that the tax cuts are not benefiting small business owners as claimed, but rather the wealthy individuals who own these businesses. The politicians who support these tax cuts, such as Senator Ron Johnson and Speaker Mike Johnson, also have personal interests in pass-through businesses, with Senator Johnson owning a stake in a plastics maker and Speaker Johnson living in a $3.7m townhouse owned by a millionaire Republican donor.

The implications of this tax policy are far-reaching, with the "everywhere millionaires" who own pass-through businesses having a significant influence on the political system. Economists Owen Zidar and Eric Zwick estimate that for every billionaire in the Forbes 400 list, there are more than 4,000 Main Street millionaires worth at least $10m, with a combined net worth of $46.7tn, nearly 12 times as much as that of the Forbes plutocrats. These millionaires are able to exert their influence through political action committees and by holding public office, with car dealership millionaires sitting on the House ways and means committee. The damage to the republic runs deeper, with the tax breaks and other policies benefiting these millionaires contributing to issues such as the limited availability of new doctors and the high cost of healthcare. The influence of these millionaires also raises concerns about the concentration of wealth and power in the US, and the need for a more equitable tax system that benefits all citizens, not just the wealthy few.

⚡ Effects Interpreter