Joyce N. Boghosian/White House via AP
Beverly Moran, Vanderbilt University
President Donald Trump has said the “big, beautiful bill” he signed into law on July 4, 2025, will stimulate the economy and foster financial security.
But a close look at the legislation reveals a different story, particularly for low-income people and racial and ethnic minorities.
As a legal scholar who studies how taxes increase the gap in wealth and income between Black and white Americans, I believe the law’s provisions make existing wealth inequalities worse through broad tax cuts that disproportionately favor wealthy families while forcing its costs on low- and middle-income Americans.
The widening chasm
The U.S. racial wealth gap is stark. White families’ median wealth between 2019 and 2022 grew to more than $250,000 higher than Black families’ median wealth.
This disparity is the result of decades of discriminatory policies in housing, banking, health care, taxes, education and employment.
The new legislation will widen these chasms through its permanent extension of individual tax cuts in Trump’s 2017 tax reform package. Americans have eight years of experience with those changes and how they hurt low-income families.
The nonpartisan Congressional Budget Office, for example, predicted that low-income taxpayers would gain US$70 a year from the 2017 tax cuts. But that figure did not include the results of eliminating the individual mandate that encouraged uninsured people to get health insurance through the federal marketplace. That insurance was heavily subsidized by the federal government.
The Republican majority in Congress predicted that the loss of the mandate would decrease federal spending on health care subsidies. That decrease cost low-income taxpayers over $4,000 per person in lost subsidies.
The Congressional Budget Office examined the net effect of the 2025 bill by combining the tax changes with cuts to programs like Medicaid and food assistance. It found that the bill will reduce poor families’ ability to obtain food and health care.
AP Photo/Rod Lamkey Jr.
Wealth-building for whom?
Perhaps the most revealing part of the bill is how it turns ideas for helping low-income families on their head. They are touted as helping the poor – but they help the wealthy instead.
A much publicized feature of the bill is the creation of “Trump Accounts,” a pilot program providing a one-time $1,000 government contribution to a tax-advantaged investment account for children born between 2025 and 2028.
While framed as a “baby bonus” to build wealth, the program’s structure is deeply flawed and regressive. Although the first $1,000 into the accounts comes from the federal government, the real tax benefits go to wealthy families who can avoid paying taxes by contributing up to $5,000 per year to their children’s accounts.
As analysts from the Roosevelt Institute, a progressive economic and social policy think tank, have pointed out, this design primarily benefits affluent families who already have the disposable income to save and can take full advantage of the tax benefits.
For low-income families struggling with daily expenses, making additional contributions is not a realistic option. These accounts do not address the fundamental barrier to saving for low-income families – a lack of income – and are more likely to widen the wealth gap than to close it.
This regressive approach – regressive because the wealthy get larger benefits – to wealth-building is mirrored in the bill’s renewal and enhancement of the New Markets Tax Credit program. Although extended by the “big, beautiful bill” to drive investment into low-income communities by offering capital gains tax breaks to investors, the program subsidizes luxury real estate projects that do little to benefit existing low-income residents and accelerate gentrification and displacement. Studies show that there is very little increase in salaries or education in areas with these benefits.
A harsh new rule
The child tax credit is another part of the bill that purports to help the poor and working classes while, in fact, giving the wealthy more money.
A family can earn up to $400,000 and still get the full $2,200 tax credit per child, which reduces their tax liability dollar for dollar. In contrast, a family making $31,500 or less cannot receive a tax credit of more than $1,750 per child. And approximately 17 million children – disproportionately Black and Latino – will not receive anything at all.
More significantly, the law tightens eligibility by requiring not only the child but also the taxpayer claiming the credit to have a Social Security number. This requirement will strip the credit from approximately 4.5 million U.S. citizen children in mixed-status families – families where some people are citizens, legal residents and people living in the country without legal permission – where parents may file taxes with an Individual Taxpayer Identification Number but lack a Social Security number, according to an April 2025 study.
Eric Lee/Getty Images
A burden on the poor
Perhaps most striking is the law’s “pay-fors” – the provisions designed to offset the cost of the tax cuts.
The legislation makes significant changes to Medicaid and the Supplemental Nutrition Assistance Program, lifelines for millions of low-income families.
The law imposes new monthly “community engagement” requirements, a form of work requirement, for able-bodied adults to maintain Medicaid coverage. The majority of such adults enrolled in Medicaid already work. And many people who do not work are caring full time for young children or are too disabled to work. The law also requires states to conduct eligibility redeterminations twice a year.
Redeterminations and work requirements have historically led to eligible people losing coverage. For SNAP, the bill expands work requirements to some Americans who are up to 64 years old and the parents of older children and revises benefit calculations in ways that will reduce benefits.
By funding tax cuts for the wealthy while making cuts to essential services for the poor, the bill codifies a transfer of resources up the economic ladder.
In my view, the “big, beautiful bill” represents a missed opportunity to leverage fiscal policy to address the American wealth and income gap. Instead of investing in programs to lift up low- and middle-income Americans, the bill emphasizes a regressive approach that will further enrich the wealthy and deepen existing inequalities.
Beverly Moran, Professor Emerita of Law, Vanderbilt University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
