Middle-Income Households Lose $1,670 in 2026 Under Trump Tax Policy

By Grace Kim

Middle-income Americans are out an average of $1,670 in 2026, once you net tax changes against inflation stoked by tariffs, the Iran war and the loss of immigrant workers, according to the Institute on Taxation and Economic Policy (ITEP, a nonpartisan think tank tracking tax distribution). The same 18 months of policy delivered a trillion-dollar tax cut over ten years to the wealthiest 1 percent, and $32 billion in 2026 savings to foreign shareholders of U.S. businesses.

That's the scorecard after a year and a half of President Trump's second term: tariffs, corporate tax cuts, curtailed IRS enforcement and a war-driven oil shock, all compounding on household budgets.

What does the $1,670 loss cover?

ITEP modeled the combined effect against a baseline where pre-2025 tax law simply continued and inflation matched Congressional Budget Office (CBO, Congress's official budget scorer) projections made before Trump returned to office. The middle 60 percent of Americans — by income — loses $1,670 on average in 2026. The poorest 20 percent loses 5.7 percent of income; the middle 20 percent loses 2.7 percent. The top 1 percent gains 0.4 percent of income, because its tax cuts outweigh inflation costs.

Three drivers push prices up:

• Tariffs, which independent analysts — and even U.S. corporations — acknowledge Americans pay, despite the president's claims otherwise.
• The Iran war, which surged oil prices; higher gas and diesel costs have run Americans over $100 billion so far.
• Immigration policy that removed foreign-born workers, creating labor shortages in agriculture and construction and lifting food and housing costs.

In plain words: most households got the price increases without meaningful tax relief.

How did Congress tilt the tax code?

The One Big Beautiful Bill Act (OBBBA), passed by Congress and signed by the president, extended expiring provisions of the 2017 Trump tax bill — which skew toward the well-off — while letting lapse a Biden-era health insurance tax credit that exclusively helped middle- and low-income taxpayers. OBBBA added fresh cuts, too: corporate reductions and partial exemptions for tips and overtime, though ITEP finds even those disproportionately benefit the wealthy.

The top-1 percent cut alone costs the Treasury $127 billion in 2026 — more than the combined 2026 budgets of the Education, Transportation and Justice departments, State, NASA, the EPA and both national endowments. Over ten years it totals a trillion dollars. The highest-income 20 percent contributes $391 billion less in 2026 than under unchanged law.

The wealthy also saved from the elimination of more than $40 billion over ten years in IRS enforcement funding aimed at high-income tax evasion, plus administrative strangling of initiatives targeting high-wealth tax shelters.

What happens to the national debt?

OBBBA's tax cuts add $4.6 trillion to federal debt over the coming decade — offset partly by $1.2 trillion in net spending cuts, mostly healthcare, for a net deficit increase of $3.4 trillion. As of February 2026, the CBO projects cumulative deficits of $22 trillion from 2025 through 2034.

Interest on the debt eats 14 percent of federal spending in 2026, rising to 18 percent by 2035. The projected $1 trillion of 2026 interest exceeds projected spending on defense, Medicaid, or almost any other single agency.

ITEP's verdict is blunt: "this was not the time to add $4.6 trillion in debt by cutting taxes for people and companies that don't need it."

How little are corporations paying?

A new ITEP report finds large corporations paying lower effective tax rates than at any point in the more than 40 years ITEP has tracked them. In 2025, 114 large, profitable companies paid zero federal corporate income tax, including:

• Tesla on $5.7 billion in profits, Citigroup on $4.4 billion, United Airlines on $4.3 billion
• Walt Disney on $8.3 billion, CVS on $8.0 billion, Palantir on $1.6 billion
• DoorDash on $1.7 billion, H&R Block on $530 million, Kohl's on $290 million

Payers aren't paying much either: Amazon paid 1.4 percent on $89 billion in U.S. profits, Meta 3.6 percent on $79 billion, ExxonMobil 1.3 percent on $11 billion, Coca-Cola 1.6 percent on $5.6 billion, Uber 3.4 percent on $4.8 billion. Many OBBBA corporate cuts are retroactive, cutting 2025 bills. Businesses overall pay $234 billion less in 2026 and $1.7 trillion less over ten years.

Foreign shareholders capture $32 billion of that in 2026 — a 6 percent share of the OBBBA cut, versus 2.4 percent for the lowest-income 40 percent of Americans. The top 20 percent plus foreign owners take three-quarters of the total.

What are the legal risks?

The Supreme Court ruled the administration's initial tariffs illegal; the replacements are also illegal, ITEP argues. Corporate tax regulations lack proper legal basis, but courts may deny "standing" (the right to sue) to challengers, since tax-cutting rules may not concretely harm anyone. An IRS-ICE arrangement put taxpayer privacy at risk, and gutted enforcement invites evasion by those who can afford sophisticated schemes.

Worse may follow: lobbyists are pushing inflation indexing of capital gains, hugely skewed to the wealthy, and the Republican Study Committee's tax plan would tilt further toward top incomes.

The bottom line: policy since January 2025 moved a trillion dollars toward the top 1 percent and $32 billion offshore, while the middle 60 percent pays the bill.