Analysis: IRS Findings Show Impact of GOP Tax and Healthcare Cuts on Working Class

The Republican reconciliation bill, promoted by former President Trump as a major economic plan, includes significant tax cuts for the wealthy but is projected to reduce after-tax income for middle- and lower-income Americans. Analysis from the Penn Wharton Budget Model indicates that individuals earning less than $51,000 may experience a decline in after-tax income, while the highest earners see substantial increases. The bill offsets these tax cuts with major reductions to healthcare and social safety net programs, including cuts to Medicaid, housing subsidies, SNAP, and energy assistance.

The bill also includes provisions that would make Affordable Care Act marketplace coverage more difficult to obtain by shortening enrollment periods and increasing administrative requirements. New Medicaid work requirements could result in millions losing coverage, as exemptions may not fully prevent loss due to increased bureaucratic barriers. The bill’s approach is expected to increase the number of uninsured Americans by millions over the next decade.

Certain tax relief measures aimed at working-class Americans, such as eliminating taxes on tips and overtime pay, are limited in scope and effectiveness, benefiting relatively few workers. The cuts to healthcare subsidies and social supports largely offset these modest tax benefits. Furthermore, allowing enhanced ACA premium tax credits to expire could add to the number of uninsured.

Fiscal analyses suggest the bill would add significantly to the federal deficit, despite spending cuts meant to balance the tax reductions for the wealthy. The Committee for a Responsible Federal Budget projects an increase in the national debt by roughly $3.3 trillion through 2034.

This legislation reflects ongoing tensions in U.S. policy debates on tax fairness, healthcare access, and social welfare, with implications for future insurance markets, regulatory compliance, and the financial stability of working- and middle-class households.