The Tax Fairness Question Dominating This Filing Season
The benefits of the One Big Beautiful Bill tilt toward the top, and the costs fall on those at the bottom.
As of early April, nearly 100 million Americans have filed their 2025 tax returns. The average refund is up 11% to $3,462, and the administration is touting “historic tax relief” from the One Big Beautiful Bill Act (OBBBA). But a comprehensive preliminary assessment recently released by Urban-Brookings Tax Policy Center (TPC) tells a more complicated story — one about who benefits, who pays, and whether the systems for delivering those benefits actually work.
The benefits tilt toward the top
The OBBBA cuts taxes for about 85% of filers in 2026, but the benefits are dramatically uneven. A household in the bottom fifth of the income distribution receives an average tax cut of $150. A household in the top 0.1% receives $286,000 — nearly 2,000 times as much. The gap is driven, in part, by permanent rate cuts that benefit higher brackets and a pass-through business deduction whose benefits flow disproportionately to earners above $1 million.
The law’s most publicized provisions — deductions for tips, overtime, and seniors — are popular but poorly targeted. TPC analysis shows why: Many of the workers these provisions are meant to help already owe no federal income tax and can’t benefit from a deduction, and, for those who can, the largest gains flow to middle- and upper-middle-income households, not those at the bottom. Treasury reports roughly 20 million overtime claims and 4.6 million tips claims so far, but these are preliminary, unverified figures and, even at face value, represent roughly 10% of all taxpayers. All three provisions expire after 2028; the permanent provisions, which drive the largest benefits for the wealthy, remain.
The cost falls on those at the bottom
The OBBBA will add between $4 trillion and $5 trillion to federal deficits over the next decade. To put that in perspective, the resources devoted to the OBBBA would have been more than sufficient to shore up Social Security’s finances for the next 75 years.
The spending cuts that partially offset these tax reductions fall squarely on low-income households. Reductions to Medicaid, the Affordable Care Act, and food stamps will leave an estimated 10 million more Americans uninsured and underfed by 2034. And the deficit, which will eventually require higher taxes, reduced services, or both to reduce, makes the picture worse still. Once spending cuts and plausible deficit financing are accounted for, roughly 70% of households end up worse off, with the heaviest burden falling on those at the bottom. The administration’s tariff policies, though separate from the OBBBA, amplify this tilt: the combined effect leaves low-income households worse off than they were before, while those at the top still gain.
Even accessing modest benefits is getting harder
Even the modest benefits the OBBBA provides to lower-income filers depend on systems that are simultaneously being degraded.
An executive order directing the IRS to phase out paper refund checks has delayed refunds for roughly 1.5 million taxpayers by ten weeks or more. Taxpayers without bank accounts must pass digital identity verification to set up direct deposit — or wait. Those most affected are disproportionately low-income, elderly, and rural.
New U.S. Postal Service processing rules, effective last December, mean that a postmark may no longer reflect the date you actually mailed your return. The National Taxpayer Advocate has warned that returns mailed on April 15 could be treated as late. And even taxpayers who e-file their federal return may still need to mail state returns because many states don’t support e-filing for all return types.
Meanwhile, the IRS has lost 27% of its workforce since early 2025. The administration’s FY 2027 budget proposes cutting an additional 4,714 staff and reducing enforcement funding by 18%, even as the OBBBA introduces a new forms and dozens of provisions requiring regulatory guidance. IRS.gov visits are up 58 percent. Demand is rising while capacity falls.
Larger refunds, deeper questions
This April 15, millions of Americans will file returns shaped by the OBBBA for the first time. The refunds may be larger — but so is the question of who this tax system is designed to serve. The permanent benefits flow to the top. The temporary relief expires. The spending cuts fall on those at the bottom. And the systems that working families depend on to file and receive their refunds are shrinking at the same time. Filing season will end on April 15. The distributional consequences won’t.
Elena Patel is co-director of the Urban-Brookings Tax Policy Center.
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Thanks, Elena. Great, clear, sobering, fact-based analysis. I'd add that the "war tax" on energy will eat up a lot of refunds.
Refunds are larger for some taxpayers if they qualify for the "sweeteners". The sweeteners are write offs (deductions) not tax credits. That means they lower your taxable income, but they do not lower your taxes dollar for dollar as a credit would. And the "sweeteners" will expire in 2028.
You qualify for No Tax on Tips if your job is on the IRS occupation pick list. If it's not on the list you can't take a deduction.
The No Tax on Overtime is no tax on part of overtime compensation. If you get paid time and a half for overtime, the deduction is only for the "half". At time and a half, you can deduct $1,000 from $3,000 of overtime pay. 1$,000 lower taxable income, but doesn't lower your tax bill by $1,000.
No Tax on Car Interest is only for new cars purchased in 2025. Leases don't qualify.
The $6K "Enhanced Deduction for Seniors" doesn't sound like No Tax on Social Security because it's not. It's another deduction (write off) for those 65 and older.
But there are two reasons why not all who are supposedly eligible for these four sweeteners are able to lower their taxes. If married, you have to file Married Filing Jointly. Married Filing Separate taxpayers do not qualify. And secondly, there are income phase outs for all four of the sweeteners. Income phase outs start at $75K for some of the provisions.
The OBBB is a trillion dollar wealth transfer from working and middle class taxpayers to the predator class (Epstein, tech oligarch, ultra wealthy--call them what you prefer). In my opinion, the only travesty addressed from Trump's 2017 tax theft (AKA Tax Cuts and Jobs Act) was the State And Local Tax (SALT) limit of $10K. This ceiling was raised to $40K in the OBBB. Trump and the GOP stole state tax write offs from taxpayers for 7 years. So I won't congratulate them on giving back some of what they stole. It's yet another example of how Trump and the GOP govern for the predator class but not the American workforce that is being exploited.