Trump's Tax Cuts Favor Millionaires, Not Small Business 2026

Donald Trump's tax policies, including the One Big Beautiful Bill Act, overwhelmingly favor millionaires and multimillionaires, not the small business owners that politicians claim to champion. The pass-through business tax deduction is a prime example of how tax cuts are skewed to the wealthy, costing billions in revenue while benefiting the top 1%.

The Pass-Through Business Tax Deduction: A Windfall for the Rich

Pass-through businesses, which include LLCs, S-corporations, and partnerships, do not pay corporate income tax. Instead, profits flow directly to owners, who pay individual tax rates. The 2017 Tax Cuts and Jobs Act introduced a 20% deduction on pass-through income, which was made permanent in the recent OBBBA. This deduction alone is projected to cost $820 billion over a decade, nearly matching cuts to Medicaid.

According to the Urban-Brookings Tax Policy Center, 57% of the $1.3 trillion in pass-through income in 2022 went to the richest 1% of the population—about 890,000 people. This starkly contradicts the narrative that these tax breaks help Main Street job creators.

Who Really Benefits? Data vs. Rhetoric

House Speaker Mike Johnson claimed the bill does not give tax cuts to millionaires, but the data tells a different story. The following table compares the distribution of pass-through income and tax savings:

This disparity highlights how the tax code is rigged to benefit the wealthy, not the average small business owner.

Historical Context: Republicans' Affinity for Pass-Throughs

In 2017, Senator Ron Johnson of Wisconsin threatened to block the Tax Cuts and Jobs Act unless the pass-through deduction was increased from 17% to 20%. He expressed a "real affinity" for owner-operated pass-throughs, but the effect was to enrich the already wealthy. This pattern continues with the OBBBA, which makes the deduction permanent, locking in benefits for millionaires.

Consequences for the Economy and Public Services

The revenue loss from these tax cuts forces cuts to essential programs like Medicaid and food stamps, harming vulnerable Americans. Moreover, it distorts capitalism by giving pass-through owners an unfair advantage over corporations, stifling competition and innovation. The myth of the "small business hero" is used to sell policies that actually undermine economic fairness.

Key Takeaways

• Pass-through tax deductions disproportionately benefit the top 1%.
• OBBBA makes the 20% deduction permanent, costing $820 billion.
• Medicaid cuts are nearly equal to the cost of this tax break.
• Politicians' claims about helping small businesses are misleading.

FAQ

In conclusion, the claim that tax cuts for pass-through businesses help small business owners is a myth. The evidence shows that these policies are a giveaway to millionaires, at the expense of working families and public services. It's time to rethink tax policy that truly supports Main Street, not just the wealthy few.