This Tax Day, Americans should be aware that former President Donald Trump has proposed increasing low- and middle-income families’ cost of living to offset direct tax cuts for the wealthiest households. His best-known proposal would extend the portions of the Tax Cuts and Jobs Act (TCJA) of 2017 due to expire after 2025. But his plan to repeal the Affordable Care Act (ACA), which has received far less attention as a tax policy matter, also could be a vehicle to deliver enormous tax cuts to the wealthiest households.
Specifically:
- The former president’s plan to extend the expiring portions of his signature tax law would deliver an average $175,000 tax cut to the top 0.1 percent of Americans—those with annual incomes greater than $4.5 million.
- Eliminating key ACA taxes for high-income Americans would deliver an average $225,000 tax cut to the top 0.1 percent. This cut was at the center of the 2017 U.S. House of Representatives bill that would have repealed the ACA, which then-President Trump championed. Project 2025—a presidential transition operation run by former Trump administration officials—has continued to call for eliminating one of these taxes. Combined with the TCJA proposal, this would mean a total average tax cut of $400,000 for the top 0.1 percent of Americans.
- Looking at the top 0.001 percent—the roughly 1,500 highest income households that the Center for American Progress Action Fund projects will each make more than roughly $80 million in 2026—repealing those ACA taxes would deliver an annual average $3.5 million tax cut each.
These numbers do not include the effects of business tax cuts he could pursue such as extending expiring business tax cut provisions of the TCJA or further cutting the corporate tax rate.
Just as importantly, Trump has proposed partially paying for these tax cuts for the wealthy with policies that would increase the middle class’s cost of living. Trump has proposed a blanket tariff on all imports, which would cost a typical family about $125 per month—roughly $1,500 annually. He would also likely attempt to repeal the Inflation Reduction Act’s electric vehicle tax credits and the Biden administration’s vehicle emissions rule, which would eventually increase the typical family’s gasoline bill by about $25 each month.
This is a combined cost of $150 a month.
Because the top 0.1 percent also buy imported goods, the tariff would somewhat reduce their tax cut. Yet all indications suggest it would still give them a net tax cut. This policy mix, meanwhile, would increase middle-income families’ overall cost of living since their monthly tax cut from extending the Trump tax cuts only comes out to about $80 per month.
President Joe Biden, on the other hand, has proposed a 2025 budget that would offer financial relief to middle-class households. He would extend expiring tax cuts for low- and middle-income families—including enhanced financial help for ACA health plans—as well as enact further financial relief through expanding the child tax credit. He would pay for this by raising taxes on the wealthy and large corporations.
The Biden administration has also successfully reduced families’ costs by curbing junk fees and passing the Inflation Reduction Act, which places a $35 cap on insulin, a $2,000 limit on out-of-pocket prescription drug spending, and empowers Medicare to negotiate for lower prescription drug prices.
Extending TCJA tax cuts would deliver an average $175,000 tax cut for the top 0.1 percent
In 2017, Trump enacted a $1.9 trillion tax cut heavily tilted to the wealthy and large corporations. The TCJA was centered around a permanent cut in the corporate tax rate—from 35 percent to 21 percent. To keep its headline cost down, however, the legislation set the individual tax provisions to expire after 2025, including numerous provisions heavily tilted to the wealthy: doubling the tax-free amount a married couple can pass to their heirs from $13.5 million to $27 million, instituting a business income deduction that delivers more than half of its benefits to households in the top 1 percent of income, and more.
The Tax Policy Center has estimated that extending the Trump tax cuts would cut the average taxes for households in the top 0.1 percent—those with incomes above $4.5 million—by $175,000 each. This is more than 1.5 times the median household income in all 50 states and is more than 350 times the average tax cut for the bottom 60 percent—those with incomes less than $110,000.
Trump’s vow to repeal the Affordable Care Act suggests an even larger tax cut for the highest earners
Trump has vowed repeatedly to “replace” the ACA during the current presidential campaign, despite offering no concrete plans on how he would do so. ACA repeal was a key priority that he articulated during both his 2016 and 2020 campaigns, as well as his first year in office. The devastation that repeal would cause Americans’ health care has received significant attention, but that it could entail a large tax cut for the wealthiest households has not.
The version of ACA repeal that passed the U.S. House of Representatives in May 2017, the American Health Care Act of 2017, would have repealed the taxes used to make the ACA deficit-reducing legislation. The two most important taxes the House bill targeted were a 0.9 percent increase in payroll taxes for high earners to help fund Medicare and a 3.8 percent net investment income tax (NIIT) on capital gains, dividends, and other investment income for high-income households.
Trump’s statement that he intends to attempt to repeal the ACA suggests that he will once again attempt to repeal its two taxes on the wealthy. In addition to being in the House bill, repealing the NIIT was in Trump’s 2016 campaign tax plan and his administration’s initial April 2017 tax plan. The initial 2017 Senate ACA repeal bill also would have repealed those taxes, but since-retired Sen. Bob Corker (R-TN) helped prevent such action from being included in the final version, which ultimately failed to pass.
Trump and Trump-aligned efforts to repeal the ACA’s taxes on the wealthy continued after the legislative effort to overturn the ACA died. The Trump administration backed an unsuccessful 2020 lawsuit to repeal the ACA—including the taxes—stating that because TCJA repealed the ACA’s individual mandate, “it necessarily follows that the rest of the ACA must also fall.” Trump publicly supported the suit, stating, “I hope that they end it. It’ll be so good if they end it.”
Most recently, a book for the next administration written by the Trump-aligned Project 2025 includes a chapter coauthored by current outside Trump advisor Stephen Moore, stating, “Extra layers of taxes on investment and capital should also be eliminated or reduced. The net investment income surtax … should be eliminated.”
A $225,000 tax cut for the top 0.1 percent and a $3.5 million tax cut for the top 0.001 percent
Repealing the two ACA taxes on high-income households would represent an additional average $225,000 tax cut for households in the top 0.1 percent—those with annual incomes greater than $4.5 million. (see Methodology) Combining that with the tax cut from extending the tax cuts in the TCJA would represent an average $400,000 tax cut for the top 0.1 percent. That is more than the annual income of 98 percent of U.S. households.
For the 0.001 percent highest income households—roughly 1,500 households that CAPAF projects will make more than roughly $80 million in 2026—the annual average tax cut from repealing the ACA taxes would be $3.5 million. (see Methodology) This tax cut is especially valuable to this group because 70 percent of their income comes from capital gains, dividends, and interest, which the NIIT taxes. Meanwhile, these income sources account for just 30 percent of income for the remainder of the top 1 percent.
How Trump would partially finance these tax cuts
Making the TCJA’s tax cuts permanent would cost $3.5 trillion over the 2025–2034 budget window, and repealing the ACA taxes would cost about $500 billion. (see Methodology)
Extending the TCJA
Only two of the Trump campaign’s proposals have the potential to partially offset the cost of extending his expiring tax cuts. Critically, they could not cover the combined cost of extending the tax cuts and additional tax cuts a second Trump administration would likely pursue, such as further cutting the corporate tax rate and eliminating the Inflation Reduction Act’s tax increases on corporations. This is because the numbers in Trump’s overall fiscal agenda do not add up.
The two proposals are:
- A 10 percent blanket tariff on all imported goods, on top of existing tariffs. CAPAF previously estimated the across-the-board tariff would cost a typical family $1,460 annually in 2025. In 2026, that would be $1,510 and come out to about $125 per month. A ballpark estimate suggests this could raise $3.9 trillion, but it would likely raise much less after accounting for reductions in taxes and incomes from workers and businesses affected by the tariff, reductions in imports, and any offsetting payments to farmers and other groups affected by trade wars.
- Repealing the Inflation Reduction Act’s clean energy provisions. Trump campaign officials have discussed cutting the Inflation Reduction Act’s $800 billion in clean energy funding. This is part of a larger agenda to repeal the Biden administration’s climate achievements that includes rolling back efficiency standards, pollution regulations, and promoting shipping natural gas overseas. These policies would reduce projected energy savings and raise prices for consumers by raising the price of natural gas, making it harder for households to afford home improvements, and more.
Looking specifically at how much families spend on gasoline, the Inflation Reduction Act’s electric vehicle tax credits and the Biden administration’s vehicle emissions standards will save a typical household roughly $300 annually on gasoline by 2032 based on Congressional Budget Office (CBO) gas tax revenue projections. (see Methodology) Therefore, eliminating these provisions would cost them $300 per year or $25 per month in additional gasoline spending.
Altogether, these two changes would eventually cost a typical family roughly $150.
Although the expiring TCJA tax cuts do also contain some tax cuts for low- and middle-income households, these would be more than offset by the impact of these two policies. Specifically, the average tax cut for households in the middle 20 percent of the income distribution—those with annual incomes between $62,000 and $110,000—from TCJA extension comes out to about $80 per month, which is smaller than the $150 increase in living costs outlined above. This means a net increase in their monthly cost of living.
As discussed above, the tariff would somewhat reduce the tax cut the top 0.1 percent receive. It is difficult to determine precisely how much they would still pay, but they would almost certainly come out net winners, unlike households in the middle 20 percent, because the expiring TCJA tax cuts are larger for them as a share of income. Available evidence also suggests they spend a smaller share of their income than the middle 20 percent, who spend 97 percent of their after-tax income, and spend disproportionately less on goods than services. They would, therefore, pay less of the tariff tax if it comes through increases in consumer prices.
President Biden, on the other hand, supports extending those tax cuts for low- and middle-income families. But instead of raising taxes on families through tariffs or requiring them to pay more for gas, he would pay for it “with additional reforms to ensure that wealthy people and big corporations pay their fair share, so that the problematic sunsets created by President Trump and congressional Republicans are addressed in a fiscally responsible manner.” In fact, President Biden would also enact further tax cuts by permanently expanding the child tax credit and earned income tax credit as he did in the American Rescue Plan.
Repealing the ACA
Repeal of the ACA would roll back taxes on the wealthy, eliminate critical consumer protections, and leave millions more Americans uninsured. This would have widespread consequences:
- Disrupting health care coverage for the 45 million Americans covered thanks to the ACA
- Allowing insurance companies to charge more for or deny coverage to millions of Americans with preexisting conditions
- Letting insurance companies decide whether to cover basic health benefits such as maternity care or prescription drugs
- Forcing patients to pay out of pocket for preventive health services such as immunizations, screenings for chronic conditions, and other forms of care
- Not allowing parents to keep young adult children on their insurance plans up to the age of 26
Conclusion
Former President Trump has proposed a set of policies that would deliver enormous tax cuts for the wealthiest households in the country. The measures he has proposed to pay for these tax cuts would force middle-class households to work harder to pay more for groceries, gas, and clothes while taking away Americans’ health care and putting it in the hands of insurance companies.
The author would like to thank Emily Gee, Trevor Higgins, Andrea Ducas, Joseph Radosevich, Colin Seeberger, Jean Ross, and Bobby Kogan for their helpful suggestions. He would also like to thank Kyle Ross and Jessica Vela for research assistance.
Methodology
Tax cut for the top 0.1 percent from ACA repeal
The Tax Policy Center estimated in 2016 that, in 2025, repealing the Affordable Care Act’s Additional Medicare and net investment income taxes would deliver a tax cut to the top 0.1 percent equal to 2.41 percent of their after-tax incomes. In 2022, the Tax Policy Center estimated that the top 0.1 percent will have an average after-tax income of $9.35 million in 2026; 2.41 percent of $9.35 million is equal to $225,000.
Tax cut for the top 0.001 percent from ACA repeal
In 2017, the Center on Budget and Policy Priorities estimated that the top 400 taxpayers would receive a $7 million average tax cut from repeal of the two ACA taxes. This article uses the same methodology but applies it to the top 0.001 percent since that is the highest income group for which the IRS provides tax statistics; it stopped providing the top 400 statistics after 2014.
The CAPAF analysis uses 2019 IRS data (Statistics of Income tables 3.3 and 4.3) and then projects 2026 numbers to align with TCJA tax cut extension statistics. It assumes that the various types of income and taxes of the top 0.001 percent grow from 2019 to 2026 in line with gross domestic product (GDP) projections from CBO’s February 24 budget and economic outlook. It assumes the number of tax units grows in line with the percentage growth of the number of households in the same CBO report. This is a projected 1,611 households. It assumes the income cutoff for the top 0.001 percent grows along with GDP per household.
Cost of repealing ACA taxes
The CAPAF analysis uses the Joint Committee on Taxation’s analysis of the American Health Care Act of 2017 (JCX 27-17). It takes the 2025–2026 estimates of the cost of repealing the ACA taxes and increases them by the percentage increase in CBO projections of nominal GDP from its January 2017 budget and economic outlook to its February 2024 budget and economic outlook. The cost of repealing the taxes after 2026 is assumed to grow with CBO’s projections of nominal GDP after 2026.
Gas savings from the Inflation Reduction Act
Before the passage of the Inflation Reduction Act, CBO estimated that the federal government would raise $22 billion in federal gas taxes in 2032. CBO also stated this estimate in its May 2023 budget and economic outlook, which was before it reestimated the cost of the Inflation Reduction Act’s electric vehicle credits and incorporated half of the effect of the administration’s (then-pending) vehicle emissions rule.
The February 2024 budget and economic outlook estimated that the federal government would only bring in $19 billion in gas tax revenue in 2032 and cited a reduction in projected gas tax revenue as a reason for the increase in the cost of the Inflation Reduction Act’s electric vehicle tax credits. The $3 billion difference in gas tax revenue is an annual $15 per tax unit reduction in gas taxes paid and is consistent with about an average 85-gallon annual reduction in gas purchased. Assuming gas prices remain the same in 2032 as in 2023—which is consistent with CBO’s projection of the price of West Texas Intermediate crude oil—that would suggest a roughly $300 average reduction in gas spending. According to the Consumer Expenditure Survey, a middle-quintile household consumes as much gasoline as an average household so the numbers above that rely on averages can safely be applied to a middle-income household.
The vehicle emissions rule has since been finalized and a new CBO gas tax revenue projection would incorporate the full effect of the rule rather than half. This would lead to an even larger projection in reduced gas tax revenue and thus average savings on gas.