President Donald Trump has sold his latest tax cuts as a lifeline for American families squeezed by an affordability crisis. The promise: relief in the form of bigger refunds and lower taxes. The reality, according to nonpartisan economic analysts, tells a far more complicated — and potentially troubling — story.
At first glance, the numbers appear compelling. The Tax Foundation estimates the tax cuts would reduce individual taxes by $129 billion, with as much as $100 billion flowing back to taxpayers in refunds. Some households could see returns rise by up to $1,000 compared with last year.
But here’s the counterargument: that same $1,000 may already be gone.
A new report from the Tax Foundation estimates that tariffs imposed under Trump’s trade policy cost the average U.S. household about $1,000 in 2025 — and that burden is expected to rise to $1,300 this year. In effect, whatever relief arrives in the form of a tax refund may be neutralized by higher costs embedded in everyday goods.
Over the long term, the fiscal math becomes even starker. Tariffs are projected to raise $1.9 trillion in federal revenue between 2025 and 2034. Meanwhile, the tax cuts are expected to reduce federal revenue by $4.1 trillion — more than double the tariff intake.
“Tariffs are really holding back the potential of the new tax law,” said Erica York, vice president of federal tax policy at the Tax Foundation. She argues that tariffs suppress investment and hiring, undermining the very economic growth the tax cuts were designed to stimulate.
The burden, economists say, does not fall on foreign governments — despite political messaging suggesting otherwise. Research from the Kiel Institute for the World Economy estimates that 96% of tariff costs are borne by U.S. importers and consumers. Even when businesses absorb some of the hit, the consequences show up elsewhere: slower wage growth, fewer jobs, or reduced investment.
“It’s still Americans who are paying the burden,” York noted. “They’re just paying it through less income growth instead of through higher prices.”
Who Actually Benefits?
The Trump administration has branded the One Big Beautiful Bill Act as the “largest tax cut in American history.” But analysts argue the benefits are unevenly distributed.
The legislation provides targeted relief — including deductions for tips, overtime pay, auto loan interest, and a $6,000 break for seniors. It also raises the cap on the state and local tax (SALT) deduction from $10,000 to $40,000.
However, that SALT expansion disproportionately benefits higher earners in high-tax states. Lower-income households, many of whom pay little to no federal income tax, may see minimal gains.
A Cato Institute analysis found top earners received significantly larger benefits than lower-income groups. Meanwhile, the Budget Lab at Yale University projects the bottom 10% of households could see incomes decline by 7%, while top earners may experience a 1.5% increase.
Critics argue this dynamic risks widening the country’s economic divide — reinforcing what economists describe as a “K-shaped” recovery, where wealthier Americans continue to climb while working-class families fall further behind.
The Supreme Court Factor
The legal future of Trump’s tariffs remains uncertain. The Supreme Court is reviewing whether the administration’s use of emergency powers under the International Emergency Economic Powers Act to impose tariffs was constitutional. Many analysts expect the court could rule against the administration.
If that happens, one possible outcome would be refunds of collected tariff revenue — most of which would go to importers. But even that scenario may offer only temporary relief. The administration has signaled it would pursue alternative legal avenues to reimpose tariffs if necessary.
In short, even a legal setback may not mean a lasting shift in trade policy.
The Bottom Line
The administration argues that tax cuts put money back in Americans’ pockets. The counterargument is that tariffs quietly take it back — and potentially more — through higher prices, slower wage growth, and reduced economic expansion.
For households already grappling with inflation and uncertainty, the question is not whether a tax cut exists on paper. It is whether, after tariffs and economic drag are factored in, they are truly better off.
The answer, according to several independent analyses, is far from clear — and for many families, it may be no.
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